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[P]
How not to deregulate

By aphrael in Op-Ed
Wed Jan 10, 2001 at 03:54:41 AM EST
Tags: News (all tags)
News

Sayeth the governor of California:

California's deregulation scheme is a collossal and dangerous failure. It has not lowered consumer prices. And it has not increased supply. In fact, it has resulted in skyrocketing prices, price-gouging, and an unreliable supply of electricity. In short, an energy nightmare.

It seemed like a good idea at the time.


In the mid-1990s, under pressure from business groups and amidst a climate that encouraged deregulation, California adopted a massive electric utility deregulation scheme which virtually no voter in the state understood, but which was nonetheless wildly popular; a November 1998 ballot measure which would have changed some of its provisions went down in flames statewide.

In broad outline, the plan involved the following:

  • The three privately owned monopoly utilities would sell their power plants to outside companies and become distributors, not generators;
  • Distributors would cease to be monopolies --- although the previous monopoly distributor would still be responsible for the maintenance of the physical lines and would be recompensed, customers would be free to purchase electricity from any distributor of their choice;
  • The statewide grid would be controlled by an independent entity, which would act as an intermediary between distributors and generators;
  • Customers were promised an immediate 10% rate reduction folowed by a 4-year rate freeze. The goal was that the rate freeze would remain significantly above market rate, thereby allowing utilities to recoup sunk costs in uneconomic power generation plants which had been built at various times in the past. Companies would not be allowed to lift or lower rates until they had certified that they had paid off those costs and an independant audit had verified it.
  • Electricity distributors were allowed to purchase electricity from the ISO one day in advance so as to prevent the big distribution companies from securing an advance lock on electricity and freezing their competitors out;
  • Publically owned utilities could only be sold if the public entity then contracts back the operation of those facilities for at least two years. (California has a number of publically owned electric utilities, including the one which supplies power to Los Angeles.

Everything proceeded as planned; the private utilities sold off most of their plants, seperate wholesale and retail markets developed, and limited end-user competition ensued. (Limited because most people wouldn't think of buying power from anyone other than the people they'd always bought power from). Everyone was happy.

The first rumblings of discontent came this summer, when San Diego Gas and Electric was certified as having paid off its sunk costs and was released from the price cap. Almost overnight, reflecting prices in the wholesale market, prices to SDGE's consumers tripled. The press was outraged; the politicians were outraged (State Senator Steve Peace, one of the architects of the deregulation law, called on ratepayers to stop paying their bills!); and the legislature quickly passed a law which would cushion rates in that region for a time.

About the same time, there were rumblings of concern about the electricity supply. No new power plants had been built in California for more than a decade, largely as a result of strict environmental laws, a rigid regulatory permit process, and rampant NIMBYism. With a population growing 13% in the last decade, and an explosion in energy-intense industries, this was a problem: California had reached the capacity of its electrical generation system. In the last year, however, the state agencies in charge of such things had approved the construction of 5 new plants, which should go on line before next summer; so if we could just get through this summer without a crisis, we'd be fine. (Electricity use is higher in the summer than at other times of the year, because of air conditioning --- and that's especially true in southern california).

So the crisis, such as it was, abated.

Enter the deluge

Until December, when the system collapsed in its entirety. The first bad news was low rainfall: the entire pacific northwest US gets a lot of electricity from hydroelectric plants; with low rainfall, these plants would have to shut down (in part because of environmental laws designed to protect the flow of salmon, who need a certaim amount of water in the rivers to be able to manuever, and have to be able to clear the dams where the hydroelectric plants are located). Enter a precipitous decline in available electricity around the region --- causing electric price spikes in Washington and Oregon, and causing generators in the area to start selling excess electricity there instead of in California. The next bad news was soaring natural gas prices (related to problems in the oil industry, which didn't completely replenish the natural gas reserve last year) which created a bind for many electricity generators: for many companies producing electricity from natural gas, the cost of production was now higher than the price cap imposed on wholsale electric rates by the federal government --- so they stopped producing electricity.

Precipitous declines in supply lead to corresponding increases in price in a free market; and this happened with electricity --- but the California electricity distributors, unable to buy more than a day in advance saw their prices hit more than distributors in other states, who were able to lock up long-term supply contracts.

Worse yet, the price cap meant that the two large-scale distributors, PG&E and Southern California Edison were unable to pass the price increase on to their customers --- leading them to eat the price increase themselves, running up hundreds of millions of dollar in losses in the course of a month, triggering the major bond agencies to threaten to cut their credit rating (which would make borrowing more expensive and therby exacerbate the problem), and forcing one of them to warn federal regulators that if things don't change it will be forced to file for bankruptcy sometime this month.

The crisis reached a crescendo over Christmas. California's government, temporarily unable to act, turned to the feds for relief; the feds responded by doing two things: (a) ordering out-of-state generators (which had stopped selling to PG&E and SCE on the perfectly reasonable basis that they were afraid they might not get paid) to resume selling power to them (despite no reassurances); and (b) raising the price cap on wholesale power. (The rationale here seemed to be that this would cause an increase in supply, which would then force prices back down --- good medium-term economic logic maybe, but in the short-term it made things that much worse). Meanwhile, in California, the PUC reluctantly approved an emergency application from PG&E and SCE for a price increase of 9% ... less than a third of what both companies said they needed to avoid bankruptcy. The companies responded by announcing massive layoffs (which will cause maintenance problems, as the people doing the maintaining are being let go).

Political arguments are flying all around. Consumer-rights activists, denying that there is a problem and arguing that the power companies knew the risk when they signed on to the plan in 1996, are promising to circulate a ballot initiative to re-regulate and impose mandatory rate reductions. Others are calling for instantly allowing free-market prices (which would cause huge popular outrage, as last summer's price increases in San Diego showed). Gray Davis, a moderate governor known for doing everything he can to avoid ruffling feathers (the joke when he was running for governor was that his name was accurate) gave a speech in which he aggressively lambasted profiteering and threatened to use eminent domain to take over the power generation facilities, if nothing else worked and it came to that.

Proposing solutions

The only coherent proposal put forward so far is that presented in the Governor's State of the State address yesterday. His proposals for short-term change were to:

  • Restructure the ISO governing board to allow more consumer representation
  • Change the bidding process
  • Allow long-term contracts for electricity
  • Pressure out-of-state power generators to provide power
  • Allow regulators to order generating facilities which have gone offline for maintenance to go back online
  • Appoint new inspectors to monitor and stand guard at facilities believed to be deliberately withholding power to manipulate prices
  • Provide $4 million to investigate racketeering charges against power generators

A lot of the anger directed at the power generators is understandable, but it's less clear how constructive it is ...

In the medium term, he proposed:

  • Prohibit the major utilities from selling their remaining generating facilities
  • Require publically owned utilities to sell excess power within the state rather than outside the state. (This seems obvious).
  • Reduce consumption and have state-provided financial incentives for replacing energy-inefficient appliences
  • Have the state permanently reduce its electricity consumption by 8%
  • Establish a california public power authority to build new power plants
  • Make public land available for power plant construction conditional on agreement to sell that power in California only.

This is very much a Gray Davis approach --- nothing dramatic; incremental moderate changes (backed by fiery rhetoric to be sure, but if ever there was a time for fiery populist rhetoric, this is it). But ... is it enough? The LA Times thinks a lot of these things can't actually be done; and many of them seem to be addressing symptoms rather than problems. Maybe that's appropriate --- the supply crisis appears to have passed, as it's been weeks since the last time the ISO threatened the state with rolling blackouts (when supply falls too low, the ISO can impose rolling blackouts to prevent outages to people who critically need electricity). But there are other clouds on the horizon:

  • The need for rolling blackouts has largely been avoided as a result of many large entities having signed contracts which got them significantly reduced electric rates in exchange for agreeing to voluntarily go offline when supplies were low. Most of those, feeling burned by a system where supplies were low continuously for a month, have determined that they're losing more money by shutting down than they would be by paying normal electric rates, and have decided to abandon that contract at the end of the current term;
  • The oil industry is concerned that if this is an unusually cold winter there may not be sufficient natural gas supplies to get through it --- and if companies are forced to deplete their reserves, the general reserve will not be replenished next summer, leading to the same problem next winter

Perhaps most disturbing are polls which conduct that the average California voter thinks the whole thing is overblown anyway: since the crisis hasn't actually resulted in outages or price jumps, as far as they are concerned, it's all media hype --- which means that they won't support policies created from a sense of emergency: the environmentalists will object to building power plants on public land, the consumer rights activists will object to bailing out the utilities; the libertarians will object to public ownership of power plants; and politics as usual will, as it often does, make it next to impossible to get anything done. Typifying this, when I asked a manager at the company where I work if budgetary planning for the next fiscal year had taken into account the fact that electricity prices are guaranteed at this point to go up, I got blank stares --- something i'm afraid is symptomatic; while some Silicon Valley companies have had the foresight to start buying generators, everyone else's head appears to be stuck 100 feet below the sand, and the price shock will hit everyone's earnings reports next year.

Meanwhile, PG&E and SCE continue to lose money daily, and their stock prices are falling like rocks. But not to worry: Governor Davis assures their investors that they won't be allowed to go bankrupt.

Let this be a warning to those considering electricity deregulation: here there be dragons, and the fighting isn't pretty.

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How not to deregulate | 148 comments (140 topical, 8 editorial, 0 hidden)
FUBAR (3.85 / 14) (#3)
by MeanGene on Wed Jan 10, 2001 at 12:35:43 AM EST

As somebody who works in this industry (although on the other coast), I have to admit that NOW, after all the shit, there seem to be no long-term solution to the crisis that would be acceptable to everybody.

Passing all the costs onto consumers is politically unacceptable.

Insituting price caps in the wholesale market would drive all the scarce merchant resources away. It also doesn't help that natural gas storage levels are at record lows in the Western US. Natural gas is a primary generation fuel out there.

Annuling all the generation auctions and returning utilities to their natural almost-hedged state is a political and legal crapshoot.

Basically, it seems that only NASDAQ going back to its natural support level of about 1700 will help the situation by shutting down all those dotcoms and their equipment. In retrospect, this nightmare should have been obvious more than a year ago - when all those companies that were supposed to be "3rd party suppliers" (take some customers from the incumbent utilities) bailed out of California market.

As a personal pet peeve - all those "consultants" who worked on California deregulation should be subjected to public floggin in every California town that desires so.


Very Sad... (3.30 / 10) (#6)
by Robert Uhl on Wed Jan 10, 2001 at 01:01:02 AM EST

Passing all the costs onto consumers is politically unacceptable.

Which is sad, because after all it is consumers who use the electricity. The rates should be allowed to rise--if people want to save money, they'll cut their usage. But I forget that one has a God-given right to cheap resources. Humbug.

The problem is that everyone has been used to guaranteed rates. The monopolies made money, because most of the time they managed to keep rates higher than they would be under competition. At the moment, though, energy is going at prime rates, or should be. But no-one is willing to pay more for his increased usage. It's sad, very sad.

[ Parent ]

Fixed income. (1.75 / 4) (#90)
by thePositron on Thu Jan 11, 2001 at 04:06:14 AM EST

It's not just that some people don't want to pay the higher rates it's that some people cannot pay the higher rates.
Not everyone has a 6 figure income.

[ Parent ]
What government is for (3.80 / 5) (#92)
by rusty on Thu Jan 11, 2001 at 05:10:39 AM EST

That's a social issue though, not an economic one. If a state cares about helping out it's poorer residents, then it can subsidize power bills for the poor. CA already does this, BTW. That doesn't mean they need to fix prices for everyone.

____
Not the real rusty
[ Parent ]
RE:What government is for (3.00 / 4) (#120)
by thePositron on Thu Jan 11, 2001 at 07:30:28 PM EST

"That's a social issue though, not an economic one. If a state cares about helping out it's poorer residents, then it can subsidize power bills for the poor."

I don't believe human relations can be categorised and seperated neatly and completely as your statement predicates. Economics is a social construct and is studied as a social science in other words economic issues are social issues to some degree. That said, I am not completely convinced that subsdies are an answer either. After all someone has to pay for the subsidies as well. I must also add that I don't have the answers. Just alot of questions, some facts, a couple of reasonable opinions and a few biases.

What I do know is that I will be pissed off when I have to pay $300.00 dollars a month on my PG&E bill for using my computer and having a few lights on at night, (I don't heat my apt., i wear sweaters.). I am considering a move out of the state as a result of this and some other factors. This is no easy decision for me because I have been in the Bay Area for 11 years. I have lived through a severe recession, earthquakes, a riot and huge rent increases, so I have held on despite the circumstances, but this may be the final straw.



[ Parent ]
Sigh (3.00 / 2) (#121)
by Robert Uhl on Thu Jan 11, 2001 at 08:15:23 PM EST

Perhaps if the state had not subsidised power for the poor they would not be dependent on it now. Mankind somehow managed to last for millenia without electricity. It's not necessary to survival. It's a luxury. People have managed to live in the Arctic without power--they're called Eskimos.

This is just another example of the harm that meddling does. Now electric power is a necessity because the infrastructure required to support alternative means of heating is gone.

As a side note, one might consider the fact that we Americans seem to think we have a God-given right to wear the same thing year-round. We refrigerate our homes in the summer and turn them into blazing ovens in the winter. We never stop to consider that just maybe wearing light cotton in the summer, or thick wool in the winter, would be as effective and cheaper.

[ Parent ]

You're kidding, right? (none / 0) (#138)
by goonie on Fri Jan 12, 2001 at 10:53:52 PM EST

While a reasonable lifestyle in a village might be possible without electrical power, it simply can't be done on a city-wide scale. Without electricity and other municipal services, you end up with disease-ridden slums, as you'll find if you care to visit a third-world city one day.

[ Parent ]
Consumers are getting the shaft (4.00 / 1) (#140)
by Chrisfs on Sat Jan 13, 2001 at 08:28:46 AM EST

To say that the solution lies in people simply using less electricity is to blame the completely wrong people. In a competitive free market, (what deregulation was supposed to give us) Utility companies that made bad decisions which caused their costs to skyrocket couldn't pass their prices on to the consumers because the consumers could switch to other utility companies that hadn't made those mistakes and so could charge less. The only reason the Utilities can get away with passing these costs on is because THERE IS NO COMPETITION IN THIS 'FREE MARKET'. We don't have a God-given right to cheap resources, but we do have a right to a fair market with more than one choice for energy. At the same time, the utilties have no God-given right to any profit whatsoever or even continued financial existence. Businesses that makes mistakes have to deal with the consequences of those mistakes. If the utilities were still regulated, there would be no crisis at all, because the utility companies would be able to purchase energy with long term contracts and the prices they charged would be set to insure a decent profit. But nooo! , the utilities companies wanted to be big boys. They wanted the opportunity to earn a greater profit than the small one allowed by the government each year. They wanted a free market. What they forgot was the classic reward/risk scenario. Along with any opportunity for greater reward comes the possibility of greater risk. The utilities have incurred great losses due to those risks, but instead of taking responsibility for them, they are looking to get the consumers to bail them out of a bad financial situation of the companies own doing. That is wrong. There is no real physical shortage of energy. There's plenty of it, people in Nevada, Washington,and Oregon are having these outrageous prices or facing the threat of blackouts, but in trying to gain bigger profits through deregulation, an ARTIFICAL shortage has been created in California and I think that it's the companies that in most part caused that shortage that should pay the financial consequences and not the consumer who is still subjected to a de facto monopoly on power.

[ Parent ]
Roman Empire (3.14 / 7) (#19)
by Sheepdot on Wed Jan 10, 2001 at 09:55:22 AM EST

Destruction from within, quietly, but consistently. Discontent across the board, but blame to lay nowhere.


[ Parent ]
Hear, Hear! (4.53 / 13) (#7)
by fink on Wed Jan 10, 2001 at 01:07:57 AM EST

The Queensland Government did a similar thing in Queensland (Australia) a couple of years ago (Queensland lives under a rock, and doesn't share it's power generation with the rest of Australia...). They took the then AUSTA Electric (the old Queensland Generation Corporation, a government body) and split it into three, "competing" sections. All this managed to do was treble the amount of management (3 Boards, 3 CEO's, you name it). The cost of electricity (as is the norm, we were promised they'd come down) has, by and large, gone up, the supply of electricity is now critically close to overloaded (and blackouts in summer are the norm in some places), and of course there's "no money" to fix the problem (profits, you see, are important!). The only reason the system didn't get a lot worse is because the government still owns all three sections - so when things go really bad, the taxpayer is there to "save us". Pity, really.

It's not all bad, however. It - in this case - did allow one of the three sections enough flexibility to do some real groundwork into getting more green energy production into Queensland. That has been basically the only positive out of this - and I'm not entirely sure that it was worth the taxpayer's money doing it that way.

I understand, from a relation of mine, that similar things have happened across the Tasman in NZ. Wide-scale deregulation (and a complete selloff of goverment generating capacity) has led to unreliable and expensive power, profits-before-service, layoffs, and other unhappinesses. This, in a country that was until recently basically a welfare state (I mean this in a nice way; I myself am an ex-kiwi).


----

dost thou desire the power? (3.77 / 9) (#10)
by Kyrrin on Wed Jan 10, 2001 at 02:02:09 AM EST

This is the sort of thing that I don't think about until something like this comes along, and then I can't stop thinking about it for a while.

I'm not alone, I think, in that my computer is on 24/7. Well, computer/s/, to be accurate. I've got a lot of technological gizmos at home that are just in constant use, for one reason or another. My power bill reflects it, believe me, and I wouldn't dream of whining about how much electricity costs when it's me who's decided to use so bloody much of it. (I seem to be in the minority on this one, but that's another rant.) It's not just price that one has to be concerned with, though. It's supply.

Most people I know think of electricity as always being there. I mean, you flip the switch, the light comes on, right? But this article made me think about what would happen if we flipped the switch and there wasn't enough juice to make the light go -- something that appears to be less of a far-fetched scenario than we might think.

Does anyone know of any good research into alternate-energy-sources that I can read up on?


"I'm the screen, the blinding light; I'm the screen, I work at night. I see today with a newsprint fray, my night is colored headache grey, don't wake me with so much..." -- REM
Wave Power (4.50 / 2) (#49)
by quam on Wed Jan 10, 2001 at 03:25:13 PM EST

MSNBC has an interesting article concerning wave power plants in Europe.

I am unsure if a wave power plant is very powerful. The article seemed to suggest that it was powerful enough.

While this project has been implemented in Portugal and, now, Scotland, it is good to see at least one area of the world implementing or pursuing a truely alternative energy scheme.

It seems that the U.S. is about to embark on a reverse path --- drilling Alaska and the Arctic for oil ("Bush renewed his call for increased domestic petroleum exploration Tuesday, and Abraham [Bush's appointee for energy secretary] echoed that.")

-- U.S. Patent 5443036 concerns a device for encouraging a cat to exercise by chasing a light spot.
[ Parent ]
Wave Power is miniscule (5.00 / 1) (#95)
by dave.oflynn on Thu Jan 11, 2001 at 10:12:11 AM EST

Wave / Wind / Solar Power supplies a tiny fraction of Europe's energy needs. I'd be very surprised if it was over 1% of the total. People have been talking about these schemes for decades now, but they tend to be a) expensive and b) unsightly (esp. wind power - generators are c. 200ft high!).

That said, however, the USA uses something like 25% of the world's energy for 3% of the population.... that can't be good. And sh*tloads of computers probably doesn't help - most aren't exactly energy efficient.

[ Parent ]

Partial deregulation is the worst of both worlds.. (4.14 / 14) (#11)
by Mr. Excitement on Wed Jan 10, 2001 at 02:20:17 AM EST

...on the other hand, the costs have to be paid somewhere along the line. If power is scarce, and governmental intervention keeps the prices, as appear on your power bill, low, the costs are still there, just invisible to the taxpayer/ voter, and therefore politically acceptable until something like this comes along, and it all catches up to you.

If the power companies hadn't faced such crippling regulation in the first place, is it possible that our electricity supply might now be coming from some cheaper, more plentiful source? Surely any company that came up with something like that could run circles around its more expensive competition.

1 141900 Mr. Excitement-Bar-Hum-Mal-Cha died in The Gnomish Mines on level 10 [max 12]. Killed by a bolt of lightning - [129]

Bah (4.37 / 8) (#26)
by cbatt on Wed Jan 10, 2001 at 11:29:14 AM EST

I live in Alberta, Canada. We have no shortage of any natural resources. We in fact have so much capability to produce surplus energy that it's a joke, and our provincial taxes are practically american in terms of "lack thereof" (federal taxes are another matter entirely). In short, we're filthy frickin rich.

Yet, we're going through our own energy sector deregulation woes. For us, we've always been used to plentiful energy at little cost to the citizens. Now we're experiencing rate hikes through the nose. Our power companies are telling us that they can't profitably make the amounts of energy that were available to us before hand. This is an absolute load of BS based upon past performance by the publicly owned companies.

The energy sector was not operating at a loss before hand. So why is it all of a sudden? Where was our "crippling regulation"? I'll tell you, there wasn't any, but what we've got is crippling deregulation.

Sure, California might have a different situation, they've got twice as many people in a single state as there are people in all of Canada. So why is deregulation hurting Albertans in the same manner, a population that knows that it's energy rich (disgustingly so)? Why is it hurting Queensland Australia too (I don't know their energy situation that well mind you)?

Because the power companies are feeding us bullshit and we're sucking it down with an ignorant grin. They've got out short hairs in one hand, while the other is free to pick our pockets.

-----------
Before you can understand recursion
you must understand recursion.

[ Parent ]

picky.... (4.33 / 3) (#106)
by sety on Thu Jan 11, 2001 at 03:59:00 PM EST

they've got twice as many people in a single state as there are people in all of Canada/

Just being picky, but it is kind of poor when you don't know the population of your country:

Canada 31,002,200 2001

California 32,521,000 2000

sources: http://www.statcan.ca/english/Pgdb/People/Population/demo23a.htm

http://www.census.gov/population/projections/state/stpjpop.txt

[ Parent ]

actually (3.00 / 1) (#122)
by cbatt on Thu Jan 11, 2001 at 11:02:44 PM EST

I know the population of my country, but california's was a shot in the dark. My initial argument is still substantiated though as Alberta only has about 3 million citizens and is feeling an energy privitization crunch whereas california has more than 10x that number. And yet we're an energy rich province.

Pardon my lack of proper statistical research.

-----------
Before you can understand recursion
you must understand recursion.

[ Parent ]

Alberta (none / 0) (#143)
by Barbarian on Sun Jan 14, 2001 at 04:16:49 AM EST

We're having trouble in Alberta because all our gas is being sold to the US to help with a cold winter and power generation. Unfortunately all are recently built power generation in Alberta is natural gas fired -- for example, the 340 MW station at Joffre built by Nova/Epcor/CN.

The solution is to build lots of nuclear reactors. A safe and redundant design is the CANDU 7 (heavy water reactor). Build about 10 in Northern Alberta. Get Uranium for Saskatchewan.


[ Parent ]
Deregulation in Nevada (4.00 / 6) (#14)
by driph on Wed Jan 10, 2001 at 05:17:01 AM EST

This is a very interesting read, as Nevada(I live in Las Vegas) has recently begun deregulation..

The current NV Power/Sierra Pacific monopoly will be exiting the generation business and going into distribution.. This is happening throughout a good deal of the US, isn't it?

Senate Bill 438 requires that Nevada implement retail electric utility competition, however, from what I've read, the Nevada system is already structured where utilities can sign contracts to buy electricity at fixed prices years into the future... I believe, even after all the Sierra Pacific/Nevada Power plants are sold, local utilities will be able to continue buying electricity produced at those plants at the 1998-99 price until 2003 or so.. and pricing is determined by the average of the last 12 months, where as California customers are paying realtime prices..

Still, I hope Nevada applies the knowledge that will be gained from the recent events in California to make sure we don't run into a similar circumstance.. But if I understand it correctly, a lot of the problem stems from the buying setup/practises of the California plants, right?

An an interesting aside, only a bit over 40% of the power generated at Hoover Dam is used by Nevada and Arizona. The rest goes to California...

--
Vegas isn't a liberal stronghold. It's the place where the rich and powerful gamble away their company's pension fund and strangle call girls in their hotel rooms. - Psycho Dave
avoid re-structuring (3.80 / 5) (#34)
by _peter on Wed Jan 10, 2001 at 01:39:08 PM EST

All California did was try to please everyone involved with a solution that they could (shamelessly) call de-reg. It was not de-regulation in the sense of ``removing regulatory restrictions''.

The problem is, price controls create shortages.

[ Parent ]

I think... (3.00 / 3) (#42)
by doormat on Wed Jan 10, 2001 at 02:40:44 PM EST

that Nevada temporarily halted deregulation 'til the whole California thing shakes out. I for one would be happy to wait a while for deregulation so we dont have power shortages and 2x and 3x prices...

|\
|/oormat

[ Parent ]
Sounds familiar.. (4.11 / 9) (#15)
by pallex on Wed Jan 10, 2001 at 05:24:29 AM EST

...oh yeah, sounds exactly like what happened in the uk when gas, water, electricity, the trains, buses etc were privatised. They went from being shit but cheap to being shit and expensive, operators cherry-picked the good services and cancelled all the unprofitable ones. There are now whole parts of the country you have to have a car to get to, especially in rural areas where theres one or two buses *a day* to the nearest town/shops.

That's Privatisation not Deregulation (4.12 / 8) (#17)
by Aztech on Wed Jan 10, 2001 at 09:15:06 AM EST

Actually I'd say deregulation of utilities in the UK has gone pretty well, the privatisation of the railways is a different matter and is in a mess largely because nobody has bothered to spend anything on the network for the last 30 years (both the last Labour and Tory governments), and surprisingly it's starting to fall apart... like a rotten piece of cheese.

I think it would of been better if the network was never nationalised in the 50-60's, everything was running quite well and you could practically go anywhere on the railways, I was told last week that the old stream trains took half the time of the current journey's because the network is in such a mess presently.

This sentiment applies to all of the nationalised industries... it was a bad experiment done purely for ideological reasons and never quite worked, luckily most of the industries have returned to a competitive market driven environment. If you look at the RoyalMail today which suffers from constant industrial disputes and inefficiencies... this was basically what every industry was like, the unions had more power than the elected government, and you had no alternatives because of the monopoly position. Plus the fact it's not the governments job to run industries, you've seen what a mess the dome has become... now just imagine the same incompetence inflicted on the major industries, this was basically what the 70's were like.

As for the utilities, my Gas and Electric are cheaper per unit, however water is still relatively expensive... but I don't think that's been deregulated yet? I heard about cases of people getting the hard sell and some companies messing up people's billing details, however if you read the small print before you sign anything and choose a decent provider it's not much trouble at all.

The next piece of the pie is when BT loose the monopoly over the local-loop in July, this will allow any operator to supply telco services using their own equipment, obviously this will improve the ADSL rollout and help keep prices competitive, as long as BT play fair (another company that still has all the hallmarks of a government dinosaur).

Personally I gave up on BT years ago and get my Cable Modem and phone lines from the cable operator, however if the telco's become more competitive then it will have positive side affects on the cable prices.

Az.

[ Parent ]
Hmmm. (4.00 / 4) (#29)
by pallex on Wed Jan 10, 2001 at 12:06:01 PM EST

"major industries, this was basically what the 70's were like" Whereas now we dont have any major industries! (Except perhaps the single mother one - highest rate in Europe! Hurray!) I`d say that privatisation implies deregulation, as the watchdogs are toothless. Most of the privatised industries are doing worse than before (Rail & BT are prime examples). Plus shuffling things off to the quangos has been fun. If I ate meat i`d probably be fairly worried about BSE. Looks as if we`ll be adopting the Chinese `year of the <insert animal>` system pretty soon.. perhaps Littlewoods will take bets on which animal is the next for a health scare -> europe-wide ban -> industry collapse as amusingly comprehensive as the recent beef `crisis`!

[ Parent ]
Hrmm (4.00 / 2) (#37)
by Aztech on Wed Jan 10, 2001 at 02:04:06 PM EST

Well... a lot of the relics from the Industrial Revolution just don't cut it anymore, labour intensive mass production has shifted to the east, so you're less likely to find a steel foundry in any part of europe let alone the UK, unless there's some huge government subsidy scheme or protectionism behind it, like coal mining in Germany, none of this is good for the consumer and only adds to the tax burden. (the coal miners in Germany are basically the same as being on the dol cue because of the subsidies keep them in work, officially figures show them in work, but there's little difference)

Basically unless you're a niche industry or produce very high quality goods then manufacturing isn't a whole lot of fun in the UK.

The fact the former incumbents are doing badly only illustrates deregulation does work, for instance you can get your phone from other companies besides BT, this is good for the consumer, obviously bad for BT's stock price, but it's entirely their own fault for not staying competitive. Their old business model of "if you don't like it, go get your phone from somebody else... ohh, you can't" doesn't cut it anymore. Again, the railways are a different matter, nobody has bothered to spend any cash on the railways for years, it's hardly a surprise it's finally falling apart.

I do agree the watchdogs are toothless at times, Oftel being so most of the time, however whatever their problems it's still better than the previous monopoly system.

I don't know what the meat industry has to do with deregulation or privatisation, but I don't eat beef anyway, it seems the production standards in Europe were just as poor, but they were lucky (or maybe not as it now seems). The US beef is pumped full of hormones, so none of it seems partially enticing, from whatever country.

GM food is the new health scare btw, BSE is so 1995 ;) Just keep off those imported Soya beans.

[ Parent ]
Quango (3.00 / 1) (#51)
by kagaku_ninja on Wed Jan 10, 2001 at 03:26:29 PM EST

What in bleedin' 'ell is a quango? I tried looking it up after encountering it on the Register, but to no avail...

[ Parent ]
Quango (5.00 / 1) (#55)
by Aztech on Wed Jan 10, 2001 at 04:18:01 PM EST

QUasi-Autonomous Non-Governmental Organization(s). i.e. a apparent independent organisation that is nothing more than a puppet for the government, or the other way round. There has been concern regarding the accountability of such bodys' whose boards are unelected, but have an influence on government (and you don't even need to bribe anyone). The members of such boards are kindly referred to as "quangocrats".

There's also PPP (Public Private Partnership) which is somewhat similar, it could have questionable links with the government, i.e. kick backs. There's also other dodgy dealings too, such as the company buying the Millennium Dome (big upturned saucer in Greenwich that looks like a circus tent). If you throw a few grand (or million) the government's way there's a good chance you could get on the christmas honours list and receive a knighthood, or you could even get a peerage these days... at least with the old hereditary system you didn't have to bribe anyone.

Much to my surprise I found a website describing all this published by the Cabinet Office themselves... how very open of them.

[ Parent ]
not quite... (4.50 / 2) (#99)
by pharm on Thu Jan 11, 2001 at 12:47:12 PM EST

They went from being shit but cheap to being shit and expensive...

True for the privatised monopolies. (eg British Rail, buses etc). However the deregulation/privatisation of the power companies *did* bring about price drops for consumers in the uk, for a number of reasons, not least because unlike CA, the UK was oversupplied with power generation capacity prior to privatisation. Also, the kind of price caps imposed in CA didn't happen here.

This is not to say that certain other privatisations weren't the most appalling waste of assetts paid for by our taxes in recent history, but that's another story...



[ Parent ]
huh? (3.75 / 12) (#16)
by gregholmes on Wed Jan 10, 2001 at 06:09:54 AM EST

... largely as a result of strict environmental laws, a rigid regulatory permit process, and rampant NIMBYism.

...these plants would have to shut down (in part because of environmental laws designed to protect the flow of salmon...

Yet your title is :

How not to deregulate

Your own story shows the fault is regulation, not deregulation.

And one other thing -

Precipitous declines in supply lead to corresponding increases in price in a free market ...

Almost right ... such declines always lead to price increases; they can just be shuffled around by government control.



re: huh? (4.33 / 3) (#33)
by Bisun on Wed Jan 10, 2001 at 01:11:03 PM EST

Almost right ... such declines always lead to price increases; they can just be shuffled around by government control.

There are circumstances and circumstances. Monopolies do not automatically decrease prices just because they can. And neither do oligarchies. Power generation plants are expensive, so there will be only a small number of them. Thus one will have either a monopoly or an oligarchy. So one can not reasonably predict that in this case deregulation has any large probability for improving the economic health of the consumer.

OTOH, there is a report that next year (this year?) one of the larger corporations will begin to sell a family sized fuel cell. This may put one limit on the price that can be charged by the electrical utilities without economic penalty. But it isn't here yet. And I have encountered rumor of only one company that will be producing it. And one would then need to keep on hand a large amount of flamable fuel. And ...

The costs are not merely individual, they are also social. In both directions. But currently I feel that "deregulation" is a shambles. I suspect that is may be a sham (or scam), but that is almost irrelevant compared to the real problem: It can't currently be made to work.

[ Parent ]

Partial deregulation (4.75 / 4) (#69)
by aphrael on Wed Jan 10, 2001 at 06:32:59 PM EST

I think the best term to describe what California was trying is 'partial deregulation'.

... largely as a result of strict environmental laws, a rigid regulatory permit process, and rampant NIMBYism. ...these plants would have to shut down (in part because of environmental laws designed to protect the flow of salmon...

One of the things that the market deals very poorly with is things like clean air which *have no market value* because they cannot be turned into commodities. The market is incapable of determining the economically optimum cleanliness of air; government regulation is the *only* way, given current market structure, to prevent massive spillover costs.

[ Parent ]

agreed ... (4.00 / 1) (#93)
by gregholmes on Thu Jan 11, 2001 at 06:18:12 AM EST

... and I wouldn't advocate eliminating such regulation. But the facts seem to indicate it is regulation, not deregulation, that is the culprit here.

Enviromentalism reminds me of a radio commercial I've been hearing lately for some home water filtration system. They give you a free testing kit, and say "the number you're looking for is zero; zero this, zero that, zero dissolved solids ...". Well, you don't get zero dissolved solids, not even in highly purified coolant water. There are always tradeoffs and tolerances.



[ Parent ]
I wish I knew... (4.00 / 9) (#20)
by gauntlet on Wed Jan 10, 2001 at 10:07:23 AM EST

The Alberta government in Canada is currently undergoing a utility de-regulation scheme. There are a lot of intelligent people out there saying it's a bad idea. Unfortunately, those are the only intelligent people that actually know what the idea is. To the rest of us, we're being marketed the idea that monopoly == bad, market == good.

Now, I'm a moderate right-winger, I'd say, and even I will admit that there are some things that market forces simply will not address. The reason for this is that money is not a good measure of the value of certain services. It's not a good measure of the value of health services, because if I had the option of giving you my entire fortune, or dying, I would choose to give you my fortune.

Given that I have that understanding, how can I tell whether or not the deregulation being imposed by my government is a good or bad idea? What would residents of California recommend I look for?

Thank you very much for this article, as it has given me foresight otherwise unavailable with regards to energy deregulation.

Into Canadian Politics?

Ontario as well (4.00 / 4) (#23)
by retinaburn on Wed Jan 10, 2001 at 11:08:14 AM EST

As soon as Ontario began to de-regulate the power companies (after months and months or promotional material stating how "GREAT" it was going to be) people started getting switched to other power providers by slammers (the same thing that had happened to the phone providers). So now we have skyrocketing power costs...its amazing that these companies can convince the government that its a good idea for them and the public despite the flurry of evidence.


I think that we are a young species that often fucks with things we don't know how to unfuck. -- Tycho


[ Parent ]
Ontario as well (none / 0) (#142)
by Barbarian on Sun Jan 14, 2001 at 04:12:16 AM EST

It's good for the Government, but not the people. It's good for friends of people in the governing party who run the power companies that will reap excess profits. It's good for the governing party members who want to secure their future after they leave politics, when their friends will repay them in kind. You mention Ontario, as the previous comment mentioned, the same thing is occuring in Alberta (and the people are getting shafted by it). The same thing motivates it, The Party politics. I say The Party because in Alberta there's only one.

[ Parent ]
Power deregulation (5.00 / 2) (#31)
by Bisun on Wed Jan 10, 2001 at 12:59:55 PM EST

Monopoly is bad, but a regulated monopoly is not necessarily as bad as some of the alternatives.

The problem is that efficient power generation plants are very expensive. So there won't be very many of them. This means that if some group forms an "agreement" as to what the price should be, that they are likely to be able to cause that to actually be the price.

If the government is in control, they will set the price so as to maximize the control of those currently in power. This usually means, to help them get re-elected. This is likely to be less than the most reasonable amount (unless they are given substantial inducements by those in charge of the power plant's economic interests).

If a single financial entity is in control, it price will be set to just below what that entity calculates will cause it's control to be threatened (alternatively, it will be set in such a way as to maximize their estimated financial return -- I think that's probably equivalent).

If a small group of financial entities is in control, they will attempt to emulate the actions of a single financial group, but each will simultaneously be attempting to maximize it's own financial returen. This can cause inefficiencies in the process which may, or may not, benefit the consumers.

Since there are only a small number of resources involved, the only other case is where different entites are struggling for control of each of them. This is chaotic, but will usually terminate in one of the three prior cases.

Therefore I think that deregulation of the power utilities is a bad idea. Even a change in the regulation policies should be approached with great concern.

Free markets work well where there are a large (more than 50?) competing sources suppling each resource. Or where the barriers to entry are sufficiently small that excessive profiteering would quickly be halted (time is an even more effective barrier than cost is). Very few cities have competing police forces. Or road maintainers (I'm not talking about the contractors, but rather about those who hire them.)

Another time when the free market works well is when the item being supplied isn't considered to be very important. A monopoly in statuettes of mimes wouldn't give anyone much leverage. Even a partial monopoly in air would. Most things come somewhere in between those two extreme positions.

I tend to be a libertarian. As such I consider government itself to be an example of a monopoly. And I consider democarcy to be an attempt to regulate it. And I consider it an extremely dangerous monopoly. Giving it the power to regulate other monopolies increases the power of government, but not more that giving it control over the power, water, sewage, police, and army does. And those have long been obvious.



[ Parent ]

clarification (4.66 / 3) (#77)
by G Neric on Wed Jan 10, 2001 at 08:49:03 PM EST

I'd say, and even I will admit that there are some things that market forces simply will not address. The reason for this is that money is not a good measure of the value of certain services. It's not a good measure of the value of health services, because if I had the option of giving you my entire fortune, or dying, I would choose to give you my fortune.

there are plenty of things that market forces will not address, but you didn't choose one of them. Your example is flawed because if there is competition among doctors to save your life, the price will not be determined by your fortune, but by what it's worth to the doctors to do it (you'll die if you fail to get appendix surgery when you need it, but you can find plenty of doctors to do it cheaply). Most people (not necessarily me) would identify the problem in that case as being the people whose fortunes are too small to induce doctors to work on them, sort of the opposite of what you are suggesting. What you are hinting at is an extreme case of the monopoly/cartel problem. If there really is something as expensive as your entire fortune that will save your life (prescription: trip to space station), it would in fact be worth it.

A better way to think of markets is that they are always neutral. They tell us how much things are worth comparatively, taking everyone's perceptions and preferences into account. If you don't like the result, it may be a market failure (monopoly is one example) but in many cases it is just pointing to an ethical decision. So, some percentage of people will never be able to produce enough income to pay for decent housing, while others will seem to have all the money in the world. What do you want to do about it? That's not a market failure, the market simply measures the magnitude of the problem, and market theory tells us what to expect if we try to change the outcome.

Now, you say you are a moderate Canadian right-winger? Is that sort of like Al Gore, or is he too conservative? ;)

[ Parent ]

Deregulation?!? (4.29 / 17) (#21)
by B'Trey on Wed Jan 10, 2001 at 10:17:51 AM EST

California did not deregulate the power industry, regardless of what has been publicized. What California has done is switch from one method of regulation to a different method of regulation, than cry that deregulation does not work.

The bottome line is that there is high demand for and low supply of power in California. That means the price is going to increase. Someone, somewhere, is going to pay for that increase. Since the California government, in their infinite wisdom, has decided that the customers won't have to pay for it, the suppliers are taking it out of hide. They won't continue to run an unprofitable business for very long.

There are a couple of options, at least. One is to switch back to a different form of regulation. The price for power will be high, but consumers won't necessarily see it in their power bill. It'll essentially be added to their tax bill. The second option is to actually deregulate the market and let competition set the price. Yes, prices will be high and people will see them in their power bill. But the true cost will be lower than in a regulated system.

re: deregulation (2.80 / 5) (#45)
by ubu on Wed Jan 10, 2001 at 02:57:13 PM EST

Someone, somewhere, is going to pay for that increase. Since the California government, in their infinite wisdom, has decided that the customers won't have to pay for it, the suppliers are taking it out of hide. They won't continue to run an unprofitable business for very long.

<sarcasm>I don't see the problem. Why not just have government pay for it?</sarcasm>

Ubu
--
As good old software hats say - "You are in very safe hands, if you are using CVS !!!"
[ Parent ]
your instincts are right, but... (3.80 / 5) (#75)
by G Neric on Wed Jan 10, 2001 at 08:17:20 PM EST

The bottome line is that there is high demand for and low supply of power in California. That means the price is going to increase. Someone, somewhere, is going to pay for that increase.

you've described one option, but it's not inevitable. The other option from market theory is an artificially low price leading to insufficient supply, i.e. shortages. These can persist forever, i.e. as in the market for tickets where scalping is illegal, or the price of diamonds where supply is purposely limited, or low-income rental units mandated by law but unprofitable to build.

The second option is to actually deregulate the market and let competition set the price. Yes, prices will be high and people will see them in their power bill.

I think you mean the right thing, but you don't have this piece of the theory exactly right. The deregulation recommendation from market theory includes the assumption of something approaching perfect competition in supply which includes the possibility of new suppliers or substitute products entering the market. The "high" prices you refer to will attract them. If this will not happen, or if the industry is what is known as a natural monopoly (if a natural gas pipeline is expensive to build, a second one will not pay for itself), deregulation is not the prescription.

But the true cost will be lower than in a regulated system.

If there is a functioning competitive market, prices will not go up if "true" prices go down. I suspect perhaps you are referring to a market efficiency argument (non economists: this means "functioning properly", not "industrial efficiency") that says that the true perfect market cost of electricity will not impose hidden costs on other factors in the economy in the form of taxes, pollution or other externalities (indirect costs or benefits from electricity not reflected in prices paid by users). But, if an industry naturally does impose externalities on the other markets (pollution or nimbyism being prime examples), then regulation is the only way to resolve the problem and keep "true" prices down.

[ Parent ]

"deregulation"? (3.30 / 10) (#22)
by session on Wed Jan 10, 2001 at 10:24:20 AM EST

Am I missing something? Your article complains about deregulation, yet there is still a "price cap" or "cushion" as set by politicians? And you wonder why when a company is finally freed from that cap, they raise their prices? Perhaps the politicians (who haven't ever worked anywhere close to the electricity industry) have no idea what the price "should" be. Maybe you should let the market decide the price -- you know, free market? Deregulated market?

The politicians are shooting themselves in their feet as usual, and blaming industry for their faults. This has happened time and time again. If there truly was a free market, if the San Diego company raised their prices, consumers would simply make a marginal choice whether or not to purchase electricity from a cheaper company or not. They obviously did not, so something must be wrong with the "free" market.

Just my .o2


"I don't know, Marge. I was raised on the TV and I turned out pretty TV." --homer.

free markets (3.00 / 2) (#40)
by alprazolam on Wed Jan 10, 2001 at 02:18:07 PM EST

who paid for the infrastructure that the power companies use to distribute energy to their customers? who pays for the burial of the nuclear waste? who prevented competition by monopolizing power lines?

[ Parent ]
re: free markets (3.66 / 3) (#44)
by ubu on Wed Jan 10, 2001 at 02:54:43 PM EST

who paid for the infrastructure that the power companies use to distribute energy to their customers?

Let me guess: the correct answer is "government". Which means, of course, "taxpayers". Duh. Are these taxpayers the same people who are now using the distributed energy? Hmmmmm...

Perhaps a better question would be, "since California taxpayers are going to pay for their power -- and its distribution, infrastructure, and waste disposal -- one way or another, what's the best way to charge them? Through taxes or through a free market?"

So pop some Xanax and take a crack at that one.

Ubu
--
As good old software hats say - "You are in very safe hands, if you are using CVS !!!"
[ Parent ]
it was a price *floor* and a price *cieling* (5.00 / 2) (#67)
by aphrael on Wed Jan 10, 2001 at 06:29:10 PM EST

? Perhaps the politicians (who haven't ever worked anywhere close to the electricity industry) have no idea what the price "should" be. Maybe you should let the market decide the price -- you know, free market?

Remember that the theory in the 90s was that the market would cause prices to fall. The power companies were concerned that this would force them to lower their prices *before* they were able to pay off fixed costs imposed or assumed as a result of previous regulations. They insisted on a fixed price until they were able to pay off their costs --- to insulate them from losses which they would otherwise be forced to incur.

Fine in theory --- except that prices rose instead of falling, screwing the power companies. Consumer activists take the position that the power companies were trying to screw consumers by insisting on a price floor, so now that the shoe is on the other foot, they should accept their screwing just like the consumers did (which is a reasonable argument that doesn't address the real problem: what happens if SCE goes bankrupt?)

[ Parent ]

"Not my problem" (3.14 / 7) (#24)
by retinaburn on Wed Jan 10, 2001 at 11:10:06 AM EST

I saw a news program about the power problems in California and more than half of the people interviewed (>50) didn't believe there was a power-shortage problem.

People can't live with them, can't kill them all.


I think that we are a young species that often fucks with things we don't know how to unfuck. -- Tycho


There's a shortage (4.00 / 5) (#28)
by MeanGene on Wed Jan 10, 2001 at 11:51:06 AM EST


Almost every other day California ISO (power grid operator) has to declare a stage 1 emergency - that's when available generation reserves fall dangerously low.
And this is during what is normally considered to be an off-season...



[ Parent ]
However (4.00 / 5) (#30)
by Bisun on Wed Jan 10, 2001 at 12:38:22 PM EST

The question is, "What do you believe the problem is?" I know of several folk who believe that there is -- lets be nice and call it an agreement -- between various sections of the power business which caused this problem. Intentionally.

I have no evidence to offer against this supposition. In some sense, it could be considered "normal business tactics". The argument is that the money paid to the companies that own the power grid went to a different part of the company than the part that is now in financial trouble. I have no special knowledge, and some of those who argue this way claim that they do. I have no real grounds to question their assertions. "It seems a bit paranoid", is a weak argument.

OTOH, conspiracies do happen. People in the same trade frequently "conspire" to extract a larger share of money from the general economy for their especial trade. That is the basis of, e.g., labor unions. So why should I believe that corporations don't do the same thing? Perhaps they are just less obvious about it.

On the third hand, my boss recently argued that if we didn't get a raise large enough to keep up with inflation, it was our own fault for being poor negotiators. So why should I believe that the power companies are any more charitable? I notice that I exprience a tendency to believe their assertions, but I don't really have any rational basis for it.



[ Parent ]

Propositions (3.00 / 1) (#66)
by aphrael on Wed Jan 10, 2001 at 06:26:03 PM EST

The argument is that the money paid to the companies that own the power grid went to a different part of the company than the part that is now in financial trouble.

On a certain scale, this is true. But a lot of the sale goes to companies like Enron which specialize in this sort of thing, and have no relationship with PG&E or SCE other than day-to-day contracting (ie., they aren't part of the same trust). Certainly this perception is behind a lot of the government's rhetoric --- and that's fine if that's really what's happening. But if it isn't, then focusing on that just digs us into a deeper hole ... so the real question is, do we want to bet the farm on a proposition which nobody seems to be able to prove one way or the other, or do we want to take the (less risky) course of accepting things at face value?

[ Parent ]

I should have been more clear :) (3.00 / 2) (#32)
by retinaburn on Wed Jan 10, 2001 at 01:00:59 PM EST

I understand that there is a power-shortage, I was making an attempt to comment on the head-in-the-sand approach taken by some californians.


I think that we are a young species that often fucks with things we don't know how to unfuck. -- Tycho


[ Parent ]
Other Reasons for High Price (2.85 / 7) (#25)
by Happy Monkey on Wed Jan 10, 2001 at 11:18:48 AM EST

The complaints appeared when the high price was revealed to customers by putting it all on their electricity bill rather than putting part of it into state taxes. Price is set by supply and demand. The higher prices are due to insufficient demand, not corporate greed (in this case). This is shown by the rolling brownouts - few service-oriented corporations except large ISPs willingly cut out service periodically. The problem is that a free market doesn't work correctly if competitors are not allowed to enter the market, and there have been no new power plants permitted in California in 25 years, if I heard correctly. I applaud many of the state's environmental efforts, but they should realize that there is a price to the NIMBY attitude. Sometimes, if something is NIMBY, it is nowhere.
___
Length 17, Width 3
re: Other Reasons for High Price (3.00 / 2) (#41)
by bluebomber on Wed Jan 10, 2001 at 02:31:55 PM EST

The higher prices are due to insufficient demand...

Err... I hope you mean insufficient supply! There's WAY too much demand for the amount of supply -- both from the perspective of consumer demand from generators and generator demand from producers.

You're basically right about the problem, though: a basic lack of understanding of simple economics...
-bluebomber
[ Parent ]

Doh! (3.00 / 1) (#100)
by Happy Monkey on Thu Jan 11, 2001 at 12:58:21 PM EST

Yes, I meant insufficient supply.
___
Length 17, Width 3
[ Parent ]
Just like to add (2.37 / 8) (#27)
by FlinkDelDinky on Wed Jan 10, 2001 at 11:37:19 AM EST

Just like to add that the recent rate cut by the fed that caused the the recent spike in the NASDAQ and DOW was intended to bring relief to the banks that loaned money to the power utilities.

Also, no matter what, us Californians, in fact the whole world, are going to have to build more powerplants. That's just the market reality regardless if it's a monoply industry or a free market industry.

Those plants will have to be paid for. The more important people find electricity, the more they're going to want a fixed price.

I'm a Libertarien so I like free markets. But when I look at my life in terms of money my biggest assets are my car then my electronics. I expect it's similar for many of you.

This energy crisis is very real. Even without the, probably neccessary, environmental regulations that limit use of conventional power plants.

We're going to have to build new kinds of plants. I'm all for various solar methods like hydro, sun, wind, tide type generation methods but there's not enough harvested by those methods.

I'm for plasma nuclear plants short term. These would have to be controlled by governments though because they make the stuff used in nuclear bombs. Long term I'd hope for some kind of fusion plants.

yea right (2.50 / 6) (#39)
by alprazolam on Wed Jan 10, 2001 at 02:14:39 PM EST

i'm for nuclear power plants to as long as they bury the waste in your county, so they don't drive through mine on the way to the desert. fusion is really long term considering the small amount of research money spent on it.

[ Parent ]
Distribution (2.00 / 2) (#65)
by aphrael on Wed Jan 10, 2001 at 06:23:25 PM EST

i'm for nuclear power plants to as long as they bury the waste in your county

In a world where power were generated on a county-by-county basis this would be reasonable. But Santa Cruz County, for example, gets almost all of its power from an oil-burning plant in Monterey County; if that were a nuclear plant it would hardly seem fair to force the county in which the plant was located to absorb all of the waste created while generating electricity for other counties.

[ Parent ]

I've got a great place to put the waste (none / 0) (#149)
by physicsgod on Mon Jan 15, 2001 at 02:46:52 AM EST

Bury it in the middle of the ocean. The muck on the bottom does a *really* good job of holding on to radioactive waste (with travel rates of meters/millenium) plus there isn't much life down there and the water does a good job of blocking radiation from what life there is, and you don't have to worry about terrorists getting their hands on the stuff. Scientific American had an article about this a couple of years ago.

--- "Those not wearing body armor are hereby advised to keep their arguments on-topic" Schlock Mercenary
[ Parent ]
irrelevant logical nitpik (3.16 / 6) (#43)
by speek on Wed Jan 10, 2001 at 02:41:47 PM EST

I'm a Libertarien so I like free markets.

You make Libertarianism sound like an unfortunate disease you happened to catch somewhere. I think you have this backward - you like free markets so you're a Libertarian. Of course, I believe most people are exactly as you put it - they define themselves as "x", therefore they believe "y". No difficult reasoning needed that way....

--
al queda is kicking themsleves for not knowing about the levees
[ Parent ]

energy crisis is a good thing (2.33 / 3) (#88)
by mattc on Thu Jan 11, 2001 at 01:40:14 AM EST

If people would stop wasting electricity (like leaving on their computer when they aren't using it, and leaving on lights they don't need) then we wouldn't be having these problems. I for one think that an energy crisis is a good thing. It will encourage people to take energy-saving measures. Hell, maybe I'll even be able to see the night sky again someday (if they turn off the lights at the nearby shopping mall).

[ Parent ]
nukes (3.33 / 3) (#116)
by Nyarlathotep on Thu Jan 11, 2001 at 05:48:16 PM EST

<i>I'm for plasma nuclear plants short term. These would have to be controlled by governments though because they make the stuff used in nuclear bombs. Long term I'd hope for some kind of fusion plants. </i>

Yes, if your going to do nukes then these things are supposidly the best, but personally I think there is a very good way to get people to switch to the eco-friendly plants like solar: let the power companies charge more for solar power, but do not give the peope the choice to avoid buying solar power. Specifically, if the power plants were allowed to charge 2x for solar and they built 10% solar then the rates would go up by 10%. The government would only need to adjust the 2x to control the profitability of solar energy. It's a nice solution where everyone wins in the long run. Unfortunatly, enviromentalists do not generally try to "use/adjust the market" or we would have seen laws to this effect.

Actually, I'm not shure how much of our current polution is really comming from power plants anyway since cars are so much worse. I suppose it's really possible that wwe do not want to raise electricity prices any time soon since that would make electric cars less cost effective (currently they cost arround 1/4th as much in fuel as gas powered cars).

Campus Crusade for Cthulhu -- it found me!
[ Parent ]
The "deregulation" plan was a bad deal f (4.33 / 6) (#35)
by Erbo on Wed Jan 10, 2001 at 01:41:31 PM EST

Having lived in California until November 1999 (before moving to Colorado), I saw the initial parts of the deregulation plan being put into effect, and it wasn't pretty.

That "10% rate reduction" that's been trumpeted as part of the deregulation plan is a farce. When the Legislature was putting together the plan, they realized that they had put in breaks for the power companies and big business customers, but nothing for consumers. As a sop to them, they instituted the 10% rate reduction...but they came up with a scheme whereby the consumers would pay for their own rate reduction by financing bonds. That's the "Trust Transfer Amount" line on your electric bills, Californians. Compare that number (which is buried at the bottom of your bill) to the "Legislated 10% Rate Reduction" number at the top. How much are you really "saving?" For most of my post-deregulation bills from Southern California Edison, the Trust Transfer Amount was actually greater...meaning that I was actually spending, say, $8.95 to "save" $7.50. (Insert random sarcastic comment here. :-) )

All I can say is, here in Colorado, Xcel Energy (formerly Public Service Company of Colorado) can have its monopoly...and if anyone tries to introduce a California-style "deregulation" proposal here, I will speak out against it. (And I was saying that before the recent crisis.)

Eric
--
Electric Minds - virtual community since 1996. http://www.electricminds.org

Yeah, this is bad (1.00 / 10) (#36)
by glmull on Wed Jan 10, 2001 at 01:56:44 PM EST

But just wait until May of 2003. Without sunlight how are we going to survive?
Zetatalk tells us what will happen in 2003.
Ripple effect (2.40 / 5) (#38)
by weirdling on Wed Jan 10, 2001 at 02:04:13 PM EST

California has a shortage of electricity, and it seems that natural gas is the only thing they can use to generate it, so in Colorado, I'm considering switching to electric heat on account of my heating bill has doubled this winter thanks to the shortage of natural gas. So, guys, please build more coal plants or nuclear plants and leave my natural gas alone.
I'm not doing this again; last time no one believed it.
not much coal out west (2.50 / 2) (#50)
by PackMan97 on Wed Jan 10, 2001 at 03:26:18 PM EST

Correct me if I'm wrong but, there isn't an abundant supply of coal out west. That is why most electricity generated on our left coast is Hydro, Nuclear or Natural Gas.

We all know that no new nuclear plants will be built anytime soon, new hydro dams are facing issues just about as tough so the remaining choice is Natural gas.

Switching to electricity isn't going to help you as you see your electric bill jump as the power companies will just pass their cost on yo you.

[ Parent ]
CO electric costs (3.00 / 1) (#102)
by weirdling on Thu Jan 11, 2001 at 02:05:51 PM EST

Colorado hasn't seen the giant rise in electric costs yet. I think we're still running more on coal and nuclear than natural gas; don't quote me on that. We're a rail-head, so getting the stuff here is easy. You're right, parts west of here don't get coal easily, though, as the really expensive part of railroad is west of Denver, but we can get it relatively cheaply.
What has risen around 100% over last year is natural gas, which I heat with. I think that people switched to natural gas when it was cheap and didn't much think what would happen when *everyone* switched to natural gas.

I'm not doing this again; last time no one believed it.
[ Parent ]
One of the interesting (5.00 / 1) (#64)
by aphrael on Wed Jan 10, 2001 at 06:21:05 PM EST

things that's coming down the pike is a home appliance which will convert natural gas to electricity; GE will begin marketing them this year.

This is advantageous if adopted on a wide scale because of transmission loss --- natural gas generators have a 38% efficiency rating, but that drops to 30% by the time the power gets to your home due to loss during transmission. If natural gas plants were replaced by home natural gas generators, overall energy efficiency would go up considerably.

The downside is that pollution would get more diffuse, which is bad for urban areas.

[ Parent ]

Electricity transmission loss is 50% (3.00 / 1) (#114)
by gregbillock on Thu Jan 11, 2001 at 05:15:23 PM EST

or so. Gas is quite a bit better.

Would the pollution savings in producing less electricity in distributed form outweigh the disadvantages? What are the relative emissions characteristics of personal generators vs. the power plants?

On the other hand, if distributed generation became popular, natural gas wouldn't be the only way people did it--solar would also be a live option at some price point.

[ Parent ]

Technical solutions to reduce power? (4.00 / 7) (#46)
by scyth1c on Wed Jan 10, 2001 at 03:02:09 PM EST

While computers while idle tend not to use *much* power, the cummulative total is still going to be fairly high.
Despite this, it continues to frustrate me that power management support on Linux for desktops and workstations is largely non-existent. This despite the power management modes of hardware which could power down the complete system until a network packet comes in. Less drastic solutions could involve actually using the spin-down modes of harddrives, power management modes of processors, and so forth for systems which have intense usage periods. Despite the power issues, there are many people who insist that things such as boot-time reduction are insignificant because "you never need to turn Linux off" or brag about uptimes in the years.
Consumer level operating systems have provided this functionality, and it is indeed pleasant to have a Windows machine powered off then instantly available.
It remains a shame that Linux boxes are not as capable, especially when they are most useful in large network configurations.


Deregulation, my ass... (3.75 / 8) (#47)
by trhurler on Wed Jan 10, 2001 at 03:12:51 PM EST

What California did was to try to quit using taxes to support the power industry while not allowing them to raise their rates AND simultaneously introducing another layer of middlemen, which increases costs. Anyone with functioning frontal lobes should have known that this would fail, and that it is anything BUT "deregulation." For the governor to attack the free market on account of that power crisis is akin to me starting a country that executes anyone who disagrees with me, calling that socialism, and then decrying the evils of socialism.

--
'God dammit, your posts make me hard.' --LilDebbie

Not quite (2.50 / 2) (#63)
by aphrael on Wed Jan 10, 2001 at 06:19:10 PM EST

an accurate description: what California did was deregulate *wholesale* distribution today and promise to deregulate *retail* distribution tomorrow. Still a bad idea.

[ Parent ]
It may not have been deregulation, but... (3.00 / 2) (#72)
by G Neric on Wed Jan 10, 2001 at 07:50:22 PM EST

introducing another layer of middlemen, which increases costs... For the governor to attack the free market on account of that power crisis is akin to me starting a country that executes anyone who disagrees with me, calling that socialism, and then decrying the evils of socialism

Your critique fails on multiple counts:

  • First, the governor is said to have assailed profiteering which is not the same as attacking the more general concept of free markets
  • Second, an additional layer of middlemen does not invariably increase costs (consider: why do so many industries have middlemen?)
  • Technically it's prices that matter in this context, not costs, but you are excused for being unfamiliar with the accounting distinction.
  • Finally every socialist country that has been founded either backs off from being socialist or starts executing people who disagree, so that hypothetical is more historically accurate than not. (see The Black Book of Communism or listen to a discussion of it.


[ Parent ]
Corrections (3.00 / 4) (#76)
by trhurler on Wed Jan 10, 2001 at 08:21:06 PM EST

First, the governor is said to have assailed profiteering which is not the same as attacking the more general concept of free markets
I read the text of his speech. He attacked the idea of a free market in electricity.
Second, an additional layer of middlemen does not invariably increase costs
This is true if and only if there is something the middleman actually provides that his customers and suppliers cannot provide equally well for themselves. In this case, the middleman was introduced solely to try to reduce vertical integration because some people think that's a hallmark of monopolistic businesses. He is totally unnecessary, and in fact is a legal fiction of sorts, because all the actual facilities needed are owned by his suppliers and his customers receive the product from his suppliers - all he does is take money out of the system and keep some books that could equally well be kept by his suppliers.
Technically it's prices that matter in this context, not costs, but you are excused for being unfamiliar with the accounting distinction
No. The reason California power companies are going out of business is that their costs of doing business are higher than the prices they're allowed to charge their customers. I don't know what accountants call those things, but I do know what the terms "cost" and "price" mean.
Finally every socialist country that has been founded either backs off from being socialist or starts executing people who disagree, so that hypothetical is more historically accurate than not. (see The Black Book of Communism or listen to a discussion of it.
I've said the same thing many times, but this does not change the fact that attacking a straw man does not prove anything. Of course, people from many places in Europe and Canada disagree with the claim that socialism invariably leads to totalitarianism... I think they're deluding themselves, but that'd be hard to prove.

--
'God dammit, your posts make me hard.' --LilDebbie

[ Parent ]
I don't see it. (3.00 / 2) (#79)
by G Neric on Wed Jan 10, 2001 at 09:54:15 PM EST

First, the governor is said to have assailed profiteering which is not the same as attacking the more general concept of free markets
I read the text of his speech. He attacked the idea of a free market in electricity.

My first reply was, "Fair enough", because I had not read it.
But then I noticed that you re-qualified free market to be "free market in electricity" which is also more narrow than the general concept of free markets as I read what you originally said. It is a different statement and it might very well be warranted to attack a free market in electricity if there are market failures. So I figured I'd better read the text myself.

Are you referring to his state-of-the-state linked above? I read it and found no general criticism of the free market in electricity. He calls California's "a dysfunctional energy market," which it is, and he goes on to say "Now, our job today is not to engage in an ideological debate over the pros and cons of deregulation, and I'm not here to point fingers or assign blame." He does engage in some flights of populist rhetoric about freewheeling prices, out of staters and greed, but come on, it's politics: he's talking to hordes of people who already don't trust markets. I think you are criticizing him for not giving the speech you would give, we who is the governor and that would be the reason why. He's trying to stoke the fire to support his plan, not make make a principled stand that would go down in flames.

Many investment decisions in the energy market are long term capital decisions. Since risk and price volatility also impose costs on market participants, there are sound economic reasons why instant deregulation can impose greater damage on a market than slow changes, and worse, political damage to the cause of free markets as we see happening. He says, "Others are calling for instantly allowing free-market prices (which would cause huge popular outrage, as last summer's price increases in San Diego showed)" That's a statement of fact; it's not a defense of free markets, but it is a defense of political reality, and most importantly, not an attack on free markets.

Do you have favorite quotes that would make your case, because I don't see it?

[ Parent ]

Well, (3.00 / 4) (#80)
by trhurler on Wed Jan 10, 2001 at 10:02:00 PM EST

Given your apparent ability to justify any statement by a politician as long as it is "pragmatic" rather than "hopelessly idealist" or however you might choose to put it, I too cannot find anything he said that was anti-free market. However, I am not burdened with the delusion that "populist rhetoric" is an excuse for saying things you otherwise wouldn't. Words have meaning - the reason those people already distrust markets is because of generations of politicians just like that idiot governor.

--
'God dammit, your posts make me hard.' --LilDebbie

[ Parent ]
cooler heads (3.00 / 2) (#84)
by G Neric on Wed Jan 10, 2001 at 11:36:33 PM EST

Given your apparent ability to justify any statement by a politician ...the reason those people already distrust markets is because of generations of politicians just like that idiot governor.

dude, you're shooting from the hip and exaggerating: and it would be no skin off my nose except I think you do damage to the cause of deregulation and free markets which I favor. I try to be more accurate, and more gracious when I fail.

The people and companies of California, including the power companies, have invested a lot of dough in the power system and systems that use power. A properly functioning free market for electricity would lead to lower prices both for power and for goods made with power, and therefore to a higher standard of living (and more converts to free markets as happened with airlines). But an improperly deregulated market can lead to money being siphoned off unfairly, i.e. for non-value creating effort, and to drastic price changes screwing people who made good-faith investments in a system that is being changed on purpose by other people allocating the winners and losers.

As to paying attention to politics: it's reality. You can't expect everyone to properly separate out the component of energy price increase due to OPEC (heck, I couldn't even do it and I'm a bit more educated on the subject than the average person) that occurred coincidentally at the same time. There are plenty of enemies of free markets out there. Gray Davis does not appear to me to be one.

[ Parent ]

the middleman's prices are key (3.66 / 3) (#82)
by G Neric on Wed Jan 10, 2001 at 10:43:11 PM EST

This is true if and only if there is something the middleman actually provides that his customers and suppliers cannot provide equally well for themselves...all he does is take money out of the system and keep some books that could equally well be kept by his suppliers.

Let me show you how it this not true in theory in a way which you don't seem to have considered: somebody would have to keep those books at the supplier: let's say they "acquired" him to do it. He'd still be taking money out of the system, but now he would require management oversight which would add a new cost to the system, and a high one since management of power companies is better directed at power generation, and his is a different specialty. This misconception is common and many otherwise sound companies have lost fortunes pursuing the holy grail of integration.

There are good, sound, free market reasons why, for instance, hospitals don't make bandaids, and why they don't even buy them directly from Mr. Bandaid, but through a middleman. They way I read what you are claiming is that you think middlemen are bad on general principles. Some may be, but I've not seen you make that point about the case in California.

but I do know what the terms "cost" and "price" mean

Let's not beat around the bush: prices are what products are offered at and what they buy and sell at, but costs are what producers pay for raw materials. This translates to, "I don't care what McDonald's costs are, I only care what their prices are." The reason this distinction is important is that McDonald's costs may go up at the same time that their prices drop, at least in the short run.

That out of the way, your original statement should have been "introducing another layer of middlemen, which increases prices." As I showed above, it is not clear that costs increase. But as I've described here, even if costs do increase, price is all that matters downstream. Higher costs and lower prices are likely to occur if the regulated power industry was making abnormally large profits, and a deregulated system might have higher costs but deliver overall prices at a lower level.

[ Parent ]

Price, cost, middlemen (2.60 / 5) (#85)
by trhurler on Wed Jan 10, 2001 at 11:39:19 PM EST

First, middlemen. If you think it is cheaper to hire a firm to keep customer accounts for you than to do it yourself in a company of thousands of people, especially when that company has been doing this itself for many decades and has experienced staff(including management!) for that purpose(which it will then lay off, as it happens,) you're deluding yourself. This is nothing like making band-aids.

Secondly, I was already using the same definitions of price and cost that you are. The difference is, you seem to think that all that matters is what consumers have to pay, whereas I'm living in a real world where if the company is losing money, it goes out of business and everyone is screwed. Therefore, to me, it is important that costs be lower than prices.

Third, given that the price of electricity in California is much lower than anywhere else I've ever heard of(by a factor of about 4-8 times, in fact,) I'd say the power companies probably weren't making abnormally large profits. In fact, they were basically subsidized by taxes until the "deregulation" plan, at which time they were not allowed to raise rates. Now they're hosed. Surprise surprise - you cut off most of their revenues and fix their price structure, and they're headed for bankruptcy. (Keep in mind that in the case of subsidies, revenues bear no necessary direct relationship to price structure.)

--
'God dammit, your posts make me hard.' --LilDebbie

[ Parent ]
whoa! (3.00 / 2) (#87)
by G Neric on Thu Jan 11, 2001 at 12:37:26 AM EST

If you think it is cheaper to hire a firm to keep customer accounts for you than to do it yourself in a company of thousands of people, especially when that company has been doing this itself for many decades and has experienced staff(including management!) for that purpose(which it will then lay off, as it happens,) you're deluding yourself. This is nothing like making band-aids.

I gave examples from which you are supposed to draw general conclusions. Let's go back to the beginning to keep your eye on the ball:

  1. You originally proposed an argument that was theoretical (since you offered no specifics from the power industry).
  2. I rebutted it theoretically by illustrating a counterexample to show the efficacy of a middleman could go either way: theory can't tell a priori.
  3. You are now picking one of those ways and, since it supports your original statement, you nominate that one, once again with no specifics to support your opinion about the power industry. You are back where you started without rebutting what I showed.

You are either engaging in dishonest-don't-want-to-admit-I'm-wrong arguing, or dim-bulb arguing.

The difference is, you seem to think that all that matters is what consumers have to pay

I'm beginning to suspect dim-bulb arguing. You are getting the price/cost thing all screwed up. It is two separate issues. You should have said "price" originally. That's one issue.

I don't care about the price the consumers pay, and nowhere did I say I did. At each stage of a multi-tiered, manufactured, brokered, distribution system, the customers at that stage only care about prices at that stage. The only ones who care about upstream costs are insiders: principles and investors.

Strangely, the only outsiders who care about costs are regulators, socialist central planners, and you who claims to be against those former two.

I'm living in a real world where if the company is losing money, it goes out of business and everyone is screwed. Therefore, to me, it is important that costs be lower than prices.

Nowhere did I say "costs higher than prices". I talked about increases and decreases.

Furthermore, in the real world when companies go out of business, everyone is not screwed. Very few are screwed, in fact. When money losing operations stop losing money: that's a good thing. Assets, be they property, plant & equipment, customer databases, intellectual property, whatever, are sold off and redeployed productively, either by competitors if they need the capacity or into other industries if they were surplus in the original industry. Assets that have no further use are not assets by the definition of asset, but they ceased being assets before the company failed, and not because of it. Displaced employees are the biggest losers because they generally face the greatest "frictions" in moving to new locations, etc. and that's why we have severance and other ways of easing the transition. They shouldn't stay employed, though, because they were engaged in a value destroying activity.

Now, because you labored under the misimpression that bankruptcy was a bad thing, I can see why you would worry about your suppliers' costs, but you can now safely stop. Creative destruction is a good thing, and you don't need to fear free markets even when you are in them.

Your last paragraph about California prices is somewhat interesting but I'm not familiar enough with the details to analyze what you've said. It grows late and I don't want to sink more time into educating myself. My job here, keeping you correct when I can see where you are astray, is done. Peace.

[ Parent ]

Creative Destruction (3.66 / 3) (#91)
by rusty on Thu Jan 11, 2001 at 04:49:35 AM EST

Furthermore, in the real world when companies go out of business, everyone is not screwed. Very few are screwed, in fact. When money losing operations stop losing money: that's a good thing.

Problem here, though. Usually, I'd agree with you. In this particular case, though, that of the power industry in CA, it's a horse of a different color.

If Sony goes tit-up, I can buy my console system from Sega, no sweat. If PG&E goes tits-up, CA really is fucked, in a big way. Ok, the company goes bankrupt, and some other company comes in to run the CA power system. They will have the exact same imposed economic conditions that caused PG&E to fail. The problem is that the market can't correct for a situation that has been legislated into existence.

So, if PG&E does go bankrupt, either CA will go dark until someone figures out how to make money selling power here, or the government will step in and bail it out (and we all know what the choice will be). So yes, the citizen gets screwed, because our tax money will go into bailing california out of this mess. And such a bailout would be federal, because I doubt california has the money for it. So now we just pass the cost on to everyone in the country.

So, while a general free market argument can see that creative destruction is good, the problem here is that the market is not free, and probably never will be, because of the nature of power generation and distribution. Also, the market is likely to never be completely free because of how vital a functional power infrastructure is to the interests of the country as a whole.

____
Not the real rusty
[ Parent ]

no legislated lotteries, please (2.66 / 3) (#94)
by G Neric on Thu Jan 11, 2001 at 09:35:02 AM EST

Usually, I'd agree with you...how vital a functional power infrastructure is to the interests of the country as a whole.

I don't thing you are really disagreeing with me here. I wasn't defending the state of affairs in CA, I was just trying to make a narrow point about sloppy use of terminology and made up theory. But bankruptcy of large fixed assets like a power plant or the power grid are the least disruptive type: for example, the Empire State Building has gone bankrupt literally dozens of times in 70 years without a tenant ever noticing. It's a byproduct of the increased risk of high leverage on such an investment. Bankers are willing to finance something like that because they know they'll have little trouble recovering the value of the asset. Very little value is lost, it's just a transfer of ownership away from owners who had put up little capital in hopes of winning big.

The problem is that the market can't correct for a situation that has been legislated into existence... until someone figures out how to make money selling power here, or the government will step in and bail it out (and we all know what the choice will be)

Well, you left out an option, which is the government de-legislating, i.e. further deregulation, but that is probably is unlikely too.<

Without necessarily disagreeing with you, I would say it that markets always correct, but we sometimes don't like the spanking. It's possibly the case that this was just bad timing/luck for deregulation. With energy prices soaring globally due to OPEC as they have over the past year, energy consumers are feeling the pinch everywhere. In CA they have had some confusing changes (and possibly magnifications) to blame it on. Furthermore, the drastic shift in underlying prices of energy inadvertantly created big winners and losers in the new deregulated system. It was inevitable and somewhat legitimate that there would be squawking. Subjecting companies to the vicissitudes of the market is a healthy thing in general because it weeds out the weak while the win-win nature of a market economy makes everybody happy. We don't want to run things like a huge lottery with big winners and big losers as seems to be happening with this deregulation.

[ Parent ]

Bad state! No dinner for you! (3.66 / 3) (#104)
by rusty on Thu Jan 11, 2001 at 03:51:31 PM EST

I don't thing you are really disagreeing with me here.

No, not at all. I was just starting from your point about markets and bringing it back to the topic at hand. :-)

Without necessarily disagreeing with you, I would say it that markets always correct, but we sometimes don't like the spanking.

I think that's really the key point here. CA isn't likely to extricate itself from this mess without a good sound spanking. The question remaining, really, is who's going to get it? The energy consumers? The power co's? The taxpayers? All of the above?

____
Not the real rusty
[ Parent ]

Everyone pays. (3.00 / 2) (#110)
by aphrael on Thu Jan 11, 2001 at 04:11:18 PM EST

CA isn't likely to extricate itself from this mess without a good sound spanking

Agreed.

The question remaining, really, is who's going to get it? The energy consumers? The power co's? The taxpayers? All of the above?

All of the above. And then, the politicians, in the 2002 election.

[ Parent ]

Deregulation had nothing to do with it. (4.28 / 7) (#48)
by seebs on Wed Jan 10, 2001 at 03:18:48 PM EST

Part of the problem is that power plants are still heavily constrained. CA has one of the most active anti-nuke lobbies in the country, no? Perhaps the inability to build new power plants has contributed to a power shortage.

In other words, if you have a massive boom in demand, but you constrain the supply, prices go up and you have shortages. For crying out loud, people, *DUH*.

If it were regulated, you'd have ration coupons, at this point. There *isn't enough power*. People don't want to try to build plants, because the technologies we have are either not efficient enough, too dirty, or too unpopular. Me, I'd prefer to see more modern nuke plants; they're a lot safer than any of the fossil fuel alternatives, and they pollute dramatically less, even when you take the radioactive waste into account. Perhaps then we'd have some breathing room to start solving the long-term problems?


One of the problems (4.00 / 4) (#62)
by aphrael on Wed Jan 10, 2001 at 06:18:24 PM EST

with nuke plants is that there are concerns about their safety in the event of a serious earthquake --- and there doesn't appear to be a good way to insure against the risk. If a plant were to fail spectacularly during a quake, the company which ran the plant *would* be held responsible after the fact; unless you can be 100% positive that won't happen, would you take the risk?

[ Parent ]
JAPAN (4.50 / 2) (#97)
by DAldredge on Thu Jan 11, 2001 at 10:40:30 AM EST

Japan generates large portions of its power from Nuclear plants and last time I checked there where more large earthquakes in Japan

The word is American, not USian.
American \A*mer"i*can\, n. A native of America; -- originally applied to the aboriginal inhabitants, but now applied to the descendants of Europeans born in America, and especially to the citizens of the US
[ Parent ]
Japan can have them (none / 0) (#147)
by Chrisfs on Sun Jan 14, 2001 at 05:58:41 PM EST

Russia had a nice nuclear power plant too until it had a melt down... then a bunch of people died and the livelihood of Finnish herders, who had never voted or consented to the plant in any way was destroyed almost instantly. The problem with nuclear plants are that the waste stays around practically forever and there's no way to moderate the damage that's done by them. With fossil fuels, you can install 'scrubbers' on smokestacks and there's other ways to lessen the toxicity of the waste products. Not so for nuclear plants.

[ Parent ]
the old chernobyl card (none / 0) (#148)
by physicsgod on Mon Jan 15, 2001 at 02:33:44 AM EST

Soviet nuclear plants are anything but nice, flammable moderators, lack of a containment structure, and then the brain trust turned off the coolant, good recipie for a disaster.

If you want safety in regard to earthquakes talk to the Japanese, they have plenty of reactors and earthquakes and don't seem to be having many problems.

And as for the enviroment, coal-fired plants actually release more radioactivity (along with other things, like carbon dioxide) into the enviroment than nuclear plants. If people would stop going into hysterics whenever they hear the word "nuclear" the world would be a much better place.

--- "Those not wearing body armor are hereby advised to keep their arguments on-topic" Schlock Mercenary
[ Parent ]

The propeganda of the utilities (3.60 / 5) (#52)
by thePositron on Wed Jan 10, 2001 at 03:28:21 PM EST

"About the same time, there were rumblings of concern about the electricity supply. No new power plants had been built in California for more than a decade, largely as a result of strict environmental laws, a rigid regulatory permit process, and rampant NIMBYism."

This is simply not true. Plants were not built because the private power companies thought that it was to risky to build new power plants. In fact many experts advised that new plants should be built because the demand would go up significantly. What happened? The power companies decided not to build new plants because the market would not be able to support the added supply. So now the same companies that are raking are picking my pockets are screaming about environmentalists. Every time a free market deregulator speaks I am going to grab my wallet.

Another lesser known fact is that the utilities that are crying bankruptcy so that the customers will bay them out are actually owned by holding compnaies that generate power. The utilities then buy power from themselves.

Additional information on this subject<A HREF"http://www.sfbg.com/News/35/14/14pge.html">Is here and here

deregulation works sometimes... (4.50 / 2) (#54)
by Bridge Troll on Wed Jan 10, 2001 at 03:57:52 PM EST

Here in Pennsylvania, the power industry was deregulated several years ago. My family has slightly lower bills.


And besides, pounding your meat with a club is a very satisfying thing to do :) -- Sleepy
[ Parent ]
enlighten us... (none / 0) (#129)
by Danse on Fri Jan 12, 2001 at 01:22:14 PM EST

How did they manage to do it without causing problems?




An honest debate between Bush and Kerry
[ Parent ]
Santa Clara county activists stopped one last year (3.50 / 4) (#61)
by aphrael on Wed Jan 10, 2001 at 06:16:48 PM EST

Plants were not built because the private power companies thought that it was to risky to build new power plants.

This depends on who you ask. The governor concedes that environmental regulations and public opposition was a big part of it, and it's clearly been an issue in eveyr plant that has been proposed --- hell, as recently as last summer, a proposed power generation facility in Santa Clara county (San Jose) was shot down due to intense public opposition.

So maybe there were two things: electric companies not investing in new plants because they believed they would create an energy surplus, and electric companies not investing in new plants because they were unsure that the permit process would be successful and didn't want to risk failure --- as well as electric companies proposing new plants and having them shot down by concerted activism designed to prevent them from happening *here*.

[ Parent ]

Wrong! (3.50 / 2) (#70)
by thePositron on Wed Jan 10, 2001 at 07:16:28 PM EST

"...last summer, a proposed power generation facility in Santa Clara county (San Jose) was shot down due to intense public opposition."

Not only is the piublic opposing the project but Cisco systems does not want the plant there because they are building a huge facility in the same area. Here is my source



[ Parent ]
Puzzled look ... (3.00 / 2) (#73)
by aphrael on Wed Jan 10, 2001 at 08:12:54 PM EST

Uh ... again, how does this prove me wrong? It's certainly not the case that Calpine doesn't want to build a plan; opposition from the public --- ie., non-governmental agencies --- was mounted and the plant was shut down.

I'm puzzled --- the article you are linking to doesn't disagree with what I said; in fact, while your title is 'wrong', the content of your post agrees with me: "not only is the public opposing the project ...".

FWIW, I don't have a link: I'm going off of memory --- i live close enough to silicon valley that i end up reading SV's newspapers.

[ Parent ]

CISCO is why this plant is NOT being built (3.50 / 2) (#89)
by thePositron on Thu Jan 11, 2001 at 03:39:48 AM EST

Did you read the article? Cisco is blocking the plant. Citizens groups could not have done it on their own. People always blame those who speak up about the quality of life in their area being threatened but often the reasons that things are not built are more complex. It's just that citizens groups and environmentalists are visible and are easy targets for corporate pr campaigns.




[ Parent ]
Oh, I see the confusion (4.00 / 2) (#109)
by aphrael on Thu Jan 11, 2001 at 04:09:18 PM EST

I'm viewing 'CISCO' as being 'local activists not wanting the electric plant in their backyard', you are viewing them as something else entirely. There are merits to both views, I suppose ....

I'm not sure that it's true that local activists alone couldn't have blocked it: they've got a ballot referendum going on whether or not to block CISCO, and nobody's quite sure which way it will go.

[ Parent ]

Off topic but os somw interest. (3.00 / 1) (#118)
by thePositron on Thu Jan 11, 2001 at 06:37:22 PM EST

It's sort of an irony that Ralph NAder has large investments in Cisco systems:-)
I think that Cisco will get their way on this one though. They employ a large amount of people in the area and a power plant is not as good for the areas' economy as a Cisco campus would be.

[ Parent ]
Off topic.. irony.. (1.00 / 1) (#119)
by thePositron on Thu Jan 11, 2001 at 06:38:10 PM EST

It's sort of an irony that Ralph Nader has large investments in Cisco systems:-)
I think that Cisco will get their way on this one though. They employ a large amount of people in the area and a power plant is not as good for the areas' economy as a Cisco campus would be.

[ Parent ]
not enviromentalists (4.00 / 1) (#115)
by Nyarlathotep on Thu Jan 11, 2001 at 05:18:10 PM EST

The "not in my backyard" people are not the same as enviromentalists. Enviromentalists care about long term issues while the "not in my backyard" people just want to to be elseware regardless of it's enviromental status. Now, the "not in my backyard" people will call themselves enviromentalists and they may convince an enviromentalists or two that the harm to the immediate population would be significant, but you will not see any of these "not in my backyard" people complaining when they want to dump the plant in the middle of some ecologically more importent swamp some place. Anyway, the "not in my backyard" debate is really a debate about "who's backyard," i.e. it's a problem of intercity/intercounty commerce and not an enviromental problem. Regardless, it's pretty clear that a place with as much money as San Jose will not have a problem winning that debate. Soundls like CISCO was the ones who forked over the cash, but San Jose will always win these sorts of contests anyway. Still, there are plenty of "bad areas" arround the bay where no one importent will oppose a power plant, so the power company was just dumb to try to get it done in San Jose.
Campus Crusade for Cthulhu -- it found me!
[ Parent ]
Not in my back yard! (none / 0) (#132)
by Scrutinizer on Fri Jan 12, 2001 at 03:31:47 PM EST

This is simply not true. Plants were not built because the private power companies thought that it was to risky to build new power plants.

Risky because of rampant NIMBYism, eco-freak whining, etc. Everybody in Festung Kalifornia wants more and more power, but you can't build a power generation station, oh no, that might discomfit the Grey-necked Dribble or whatever. Might lower the property values for the huge mass of absentee landlords, too. Can't have that.

I live in CA. I have a privately-owned power supplier. They were forced to close their main generation facility because of this crap several years ago, so thay bought a bunch of PG&E's hydro-power stations and dams. But the life-cycle of the spotted trout takes precedence over humans, so thay are not allowed to expand their capacity.

Result - Price increases. Amazing, isn't it?...

-- This .sig for rent - cheap!

[ Parent ]

There was no deregulation (2.80 / 5) (#56)
by Brandybuck on Wed Jan 10, 2001 at 04:18:28 PM EST

There was no deregulation. They opened up one small corner of the power marketplace. That was it. An open market is not necessarily a deregulated market. And opening up one part of the market while keeping the rest closed is a guaranteed recipe for economic disaster.

That little cynic in me keeps whispering "it's all a plot to discredit the word 'deregulate' by attaching it to this charade." Sort of like they discredited the term 'free market' by attaching it to NAFTA, which was anything but free.

Or... (5.00 / 2) (#57)
by retinaburn on Wed Jan 10, 2001 at 04:26:39 PM EST

The Stock Market...its got regulations out the wazooo ...I can't think of any truly /free market/ system. And I would be very afraid of a true /free market/ power distribution system. As it is if you have the money to pay you have power. If it was truly /free market/ then theoretically you could be willing to pay and still have no service because its not economically-viable for any company to offer service in your area.


I think that we are a young species that often fucks with things we don't know how to unfuck. -- Tycho


[ Parent ]
Deregulation (4.00 / 1) (#60)
by aphrael on Wed Jan 10, 2001 at 06:13:13 PM EST

I think the idea was that this was a phased-in deregulation. If you take a heavily regulated system and switch to instant deregulation *tomorrow*, you will go through a period with all sorts of perverse economic incentives, and sudden shifts in market behavior which will make the consumers, and therefore the voters, extremely unhappy.

One way to look at it is that the phase-in (which would have completed this year, ironically) was based on bast-case assumptions rather than worst-case assumptions, and we are paying the price for it today.

[ Parent ]

Not to mention... (3.50 / 2) (#58)
by yonderboy on Wed Jan 10, 2001 at 05:39:22 PM EST

California's power problems has started causing problems for Northern Oregon and Southern Washington (BPA territory), as well as causing Portland to go on a full scale drought alert.

Drought alert? (1.00 / 1) (#59)
by aphrael on Wed Jan 10, 2001 at 06:11:35 PM EST

as well as causing Portland to go on a full scale drought alert

How does that work? Portland is diverting water away from normal water systems to hydro plants, causing severe water shortages? *puzzled look*

[ Parent ]

Keep going north! (none / 0) (#136)
by ralph snart on Fri Jan 12, 2001 at 06:09:38 PM EST

We are selling a ton of our extra power from British Columbia to California as well.

Our private utilities (BC Hydro and BC Gas) are making a killing.
But our prices have skyrocketed to the point where a lot of the greenhouse businesses are going out of business.

Our province has the most Hydroelectric capacity in Canada, yet we pay the most!

[ Parent ]
And here's the funny line from Davis' address (4.20 / 5) (#68)
by greydmiyu on Wed Jan 10, 2001 at 06:30:33 PM EST

He wants to offer incentives to people to conserve energy. 250 million (I think that was it, wasn't it?) dedicated to those incentives. 250 billion, collected in taxes, from the people of the state (mostly the upper-middle class and higher) to be redistributed to people who conserve energy (after being wrung through the state's money sucking system).

Want people to conserve?

Deregulate the right way. Let the Free Market reign, let the suppliers charge a fiar market price and when people get hit with the power crunch watch how fast they switch to compact florecent bulbs, turn off electronics, up the AC a few degrees, drop the heater a few degrees (often in the same day in SoCal), actually open up their windows on a balmy day and take other measures. Taking money just to give it back is /NOT/ the answer.
-- Grey d'Miyu, not just another pretty color.
The right way? (3.50 / 6) (#71)
by thePositron on Wed Jan 10, 2001 at 07:43:25 PM EST

Ok then you come to where I live and pay $300.00 for a bill that used to cost $50.00 even after conserving electricity.
Albeit conservation is one answer to the problem but it is not the only answer.
I am sick of people who are observing this acting smug as if they know the right way.

Why do people always give the benefit of the doubt to people who claim that they wil use "enlightened self interest" in the "free market"?
Why are people always giving the benefit of the doubt to executives who make 2,000,000 a year as the CEO of PG&E does?
Why doesn't he take a pay cut if his company is going bankrupt?
Why are the citizens of California being asked to pay for a failed plan pushed by the utilities themselves?
I am sick and tired of excuses being made for these pirates get rich off of complex free market schemes while the middleclass and poor suffer at the hands of their "free market."
This is the second time in my life I have seen this crap, the first was the S&L debacle in the 80's.
Deregulation and free market econmomics is a code word for concentration of wealth in the hands of the few.
Stop making excuses for the market. Markets != God and they fail sometimes just like all human constructs do.






[ Parent ]
re: the right way (2.40 / 5) (#101)
by ubu on Thu Jan 11, 2001 at 01:36:11 PM EST

Why are people always giving the benefit of the doubt to executives who make 2,000,000 a year as the CEO of PG&E does? Why doesn't he take a pay cut if his company is going bankrupt?

Brilliant plan. That $2m will fix the budget right up.

Why are the citizens of California being asked to pay for a failed plan pushed by the utilities themselves?

Because the politicians are asking them to. The more appropriate question is, "Why aren't the citizens of California being asked to pay for every kilowatt of power they voluntarily consume?"

Deregulation and free market econmomics is a code word for concentration of wealth in the hands of the few. Stop making excuses for the market. Markets != God and they fail sometimes just like all human constructs do.

Markets never fail. Period. They are always (yes, always) successful at their primary goal: distributing costs to the voluntary purchaser of goods and services at a voluntary price.

Ubu
--
As good old software hats say - "You are in very safe hands, if you are using CVS !!!"
[ Parent ]
Markets never fail. Period? (4.50 / 2) (#103)
by thePositron on Thu Jan 11, 2001 at 02:52:40 PM EST

"Brilliant plan. That $2m will fix the budget right up."

I didn't say it was a plan. I have ran businesses before and if we were not making money I would not pay myself. That simple. So why should the CEO of PG&E continue to recieve such a high salary for a failing company? It's a question not an answer or a plan.

"Because the politicians are asking them to. The more appropriate question is, "Why aren't the citizens of California being asked to pay for every kilowatt of power they voluntarily consume?"

Well, no the politicians are not the only ones asking us. The utilities are threatening the state and it's citizens with blackouts if we do not succomb to their demands. The law that the utilities pushed and got passed contained an agreement that there would be a rate freeze until 2002 or until some other conditions were met. Basically the utilities are attempting to weasel their wayout of a contract that they pushed on us and our elected politicians. IF someone did this to me in business or life I would never deal with them again. Unfortunatley this "free market" does not give me many choices to be free in.

"Markets never fail"

If you believe this, I have a plot of land on some lake front property to sell to you. Markets are subject to the same problems that all human activities are. Maybe theoretically they never fail but they fail often in reality. That's not to say they do not have a function and place. At this point in history California was not ready for a "free market". A similar situation occured in Bolivia recently. Their water market was deregulated and then privatized and bought by Bechtel and a British firm. Within the first month of this arrangement water prices in Bolivia tripled. For many of the citizens of Bolivia this increase in price meant that half of their income was devoted to water. The people of Bolivia took to the streets and kicked Bechtel out their country for their greedy "free market" pirating.



[ Parent ]
re: yes, always. Am I speaking Portuguese? (3.25 / 4) (#105)
by ubu on Thu Jan 11, 2001 at 03:56:50 PM EST

So why should the CEO of PG&E continue to recieve such a high salary for a failing company? It's a question not an answer or a plan.

Should or should-not isn't really relevant. I'm sure the CEO of PG&E is well-paid by political calculators. It almost always happens, that's just the way it goes.

The utilities are threatening the state and it's citizens with blackouts if we do not succomb to their demands.

You make it sound as though they were extorting money, and not simply going bankrupt.

The law that the utilities pushed and got passed contained an agreement that there would be a rate freeze until 2002 or until some other conditions were met. Basically the utilities are attempting to weasel their wayout of a contract that they pushed on us and our elected politicians.

Right. Short story, the utilities thought they could make more money through a different public policy. Unfortunately for them (and for California) the power market underwent some adjustments at precisely the wrong time for the new policy. So they ended up screwing themselves (and the rest of California) over.

This is par for the course with economic policies decided at the state level. Under a separate set of circumstances the utilities might have gotten away with making a shitload of money at taxpayer expense and nobody woulda been the wiser.

But it doesn't really matter, in the end. State-run economies always end up miscalculating the market because the market is inherently unpredictable.

IF someone did this to me in business or life I would never deal with them again. Unfortunatley this "free market" does not give me many choices to be free in.

What are you talking about? If California's power market were truly free you would have the choice whether or not to do business with SoCo Edison and PG&E. As it is, they have a statewide monopoly. They just happen to have made political committments they can no longer keep. This "deregulation" is nothing of the sort; you must be the last person in California to have that bit of truth hit you upside the head.

Ubu
--
As good old software hats say - "You are in very safe hands, if you are using CVS !!!"
[ Parent ]
[aside comment] (1.00 / 2) (#107)
by ubu on Thu Jan 11, 2001 at 04:02:41 PM EST

I'm always ashamed when I post so vehemently, only to be treated to a bit of even-handed behavior (like being moderated to 3 by the guy I'm arguing with). My bad.

Ubu
--
As good old software hats say - "You are in very safe hands, if you are using CVS !!!"
[ Parent ]
Monopoly? (4.50 / 2) (#117)
by aphrael on Thu Jan 11, 2001 at 06:06:05 PM EST

As it is, they have a statewide monopoly

Kinda sorta not really. I can buy electricity from other vendors ---- it's just that because up until 4 years ago I couldn't, there's no compelling reason to do so.

And i'm *not* convinced that having multiple competing sets of power lines would constitute an improvement.

[ Parent ]

re: monopoly (5.00 / 1) (#124)
by ubu on Fri Jan 12, 2001 at 12:37:06 AM EST

Competing power lines, whatever... it's up to the competing parties to decide what to do about it. A Popular Science article some years back discussed the merits of electricity deregulation, and the possible scenarios involved. One of the most compelling outcomes would be the growth of an alternative-energy-source industry, funded by conscientious consumers interested in paying a little more for a renewable source.

Ubu
--
As good old software hats say - "You are in very safe hands, if you are using CVS !!!"
[ Parent ]
let me see if I get this... (none / 0) (#128)
by Danse on Fri Jan 12, 2001 at 01:05:37 PM EST

Should or should-not isn't really relevant.

Maybe it doesn't matter much to the situation, but I guess it's always nice to see that some people will be well-rewarded no matter how bad they screw things up.

You make it sound as though they were extorting money, and not simply going bankrupt.

Isn't that basically what a bailout is? They made bad decisions and the people have to pay for them.

But it doesn't really matter, in the end. State-run economies always end up miscalculating the market because the market is inherently unpredictable.

Is there any good way of transitioning from a government-run monopoly to a free market without screwing over consumers?




An honest debate between Bush and Kerry
[ Parent ]
Well, considering... (none / 0) (#131)
by greydmiyu on Fri Jan 12, 2001 at 02:19:00 PM EST

<I>Is there any good way of transitioning from a government-run monopoly to a free market without screwing over consumers?</I>

Considering a government-run monopoly is screwing over the consumers in the first place the question is moot.
-- Grey d'Miyu, not just another pretty color.
[ Parent ]
re: Well, considering... (4.00 / 2) (#133)
by ubu on Fri Jan 12, 2001 at 04:28:36 PM EST

Grey d'Miyu is pretty much square-on. There's a mind-numbingly-simple truism in play, here: someone is going to pay for the power. That someone is, and always has been, the private citizen.

The transition from government-run monopoly to free-market producers and distributors is merely a transition from one form of payment to another. That it happens to be a fairer, more efficient, and incentive-laden form of payment is the real motivation.

Ubu
--
As good old software hats say - "You are in very safe hands, if you are using CVS !!!"
[ Parent ]
re: let me see if I get this... (none / 0) (#134)
by ubu on Fri Jan 12, 2001 at 04:30:42 PM EST

Maybe it doesn't matter much to the situation, but I guess it's always nice to see that some people will be well-rewarded no matter how bad they screw things up.

Why do you think government was invented in the first place?

Isn't that basically what a bailout is? They made bad decisions and the people have to pay for them.

Yes, that's exactly what a bailout is. My remark was tongue-in-cheek.

Ubu
--
As good old software hats say - "You are in very safe hands, if you are using CVS !!!"
[ Parent ]
Not ready for a free market? (none / 0) (#130)
by greydmiyu on Fri Jan 12, 2001 at 02:16:06 PM EST

Sorry, this isn't a free market. Don't blame its failure on the free market when it isn't one in the first place. A free market doesn't have rate caps, period.
-- Grey d'Miyu, not just another pretty color.
[ Parent ]
No such animal (none / 0) (#150)
by thePositron on Mon Jan 15, 2001 at 05:04:09 AM EST

There are very few "free markets" in existance. What market has no rules or governing body determining it's operation?
The term "free market" is a clever rhetorical device that is used to convince the masses that they will somehow benefit from the complete privatization and deregulation of all services. One can attach the word free to any object or subject and make it seem like an appealing idea.
Like I have said before markets have their place and their function but they are not the answer to everything.

[ Parent ]
How to pass costs to consumers... (4.00 / 3) (#113)
by gregbillock on Thu Jan 11, 2001 at 04:58:08 PM EST

...let the suppliers charge a fiar market price and when people get hit with the power crunch watch how fast they switch to compact florecent bulbs, turn off electronics, up the AC a few degrees, drop the heater a few degrees (often in the same day in SoCal), actually open up their windows on a balmy day and take other measures.

The problem I see with a free electricity market is that it is highly variable. Demand fluctuates very broadly during the course of the day, and from day to day. Passing these costs on to consumers would solve the problem--if you knew leaving your light on all day might cost you $40 you'd turn it off. In order to shield themselves from this kind of expense, people would buy power in advance at a fixed rate.

This is exactly what happened at a larger scale to the power utilities, who were prohibited from buying on contract from generators. They got socked with massive prices.

It seems to me that enabling longer term contracts by utilities with generators would help. I see this is part of Davis' plan.

Does anyone know where the profitability threshold for renewable energy sources is nowadays? It is very hard to build new nuke plants anywhere right now, because of public concern. (Which would translate into massive liability if anything went wrong, and forceful opposition to starting and completing projects.) It seems to me that if the price is high enough to make renewable plants profitable, they wouldn't face these same kinds of hurdles that nukes and coal plants do.

Of course, it would take several years to get them online...

[ Parent ]

Renewable costs (none / 0) (#145)
by cameldrv on Sun Jan 14, 2001 at 02:18:58 PM EST

I believe that well-sited wind farms can generate at about 2-3 cents per kwh which makes them competitive and in some cases better than fossil plants. Several utilities have deployed wind farms in the U.S. I know at least in Wisconsin. However, there are a limited number of good sites for them.

Photovoltaic solar I believe is still around 7 c/kwh which is not competitive, however there is quite a bit of work going on in the area of polymer solar panels which if it pans out could increase the efficiency of panels by a factor of perhaps 5. This would make them the cheapest thing going, and there are large parts of the United States, particularly New Mexico and Arizona which have huge potential for solar if the right technology is available to convert it to electricity.

[ Parent ]
Holding company confusion... (4.75 / 8) (#74)
by jmc on Wed Jan 10, 2001 at 08:13:29 PM EST

What is confusing to many customers (and apparently media and lawmakers as well) is that there are 2 PG&E's: the PG&E Corporation (stock symbol PCG, and website at www.pgecorp.com), and the PG&E Company, which sells customers their electricity (website at www.pge.com).

PG&E Company IS about to go bankrupt, has no generation capacity, and is getting only 5-6 cents / kwh from customers while paying 5-10x as much to suppliers. However, they are a wholly owned subsidiary of PG&E Corporation.

PG&E Corporation owns quite a bit of generating plants, including the largest privately owned hydroelectric system in the world, and is therefore profitting nicely from the high wholesale rates. After deregulation, prices were frozen at 5 cents / kwh, while the cost from wholesalers at the time was 3 cents and expected to go down with increased competition. This extra money was supposed to pay for "stranded costs"... i.e. bad investments by the utility. PG&E Corp used these profits, plus money they raised by auctioning off some of their power plants in CA to out of state companies, to buy a bunch of coal burning plants on the East Coast as well as assets in other countries.

Conspiracy theorists suggest that PG&E Corp is trying to drive PG&E Company into bankruptcy, in order to rid themself of an unprofitable asset. However, if the government raises the rate cap and customers bail out PG&E Company, PG&E Corp wins either way because the Company is making them profits again.

For the consumer activists' view on the whole situation, see www.turn.org.

Why did wholesale rates skyrocket? (3.00 / 1) (#96)
by speek on Thu Jan 11, 2001 at 10:17:50 AM EST

So why did wholesale rates go from 3 cents to 25+ cents (I'm taking this from your 5-10x assertion - I myself know absolutely nothing of value :-)

If the cost of wholesale energy went up that much legitimately, then didn't they err in the extreme by not adjusting the 5 cent price cap? Regardless of any conspiracy theories about PG&E....

--
al queda is kicking themsleves for not knowing about the levees
[ Parent ]

Reasons (3.00 / 1) (#112)
by aphrael on Thu Jan 11, 2001 at 04:47:02 PM EST

So why did wholesale rates go from 3 cents to 25+ cents (I'm taking this from your 5-10x assertion - I myself know absolutely nothing of value :-)

There have been two major hits to electricity supply this year: hydroelectric plants throughout the northwest are idle because of low rainfall, and there's a serious shortage of natural gas.

[ Parent ]

PG&E rates (none / 0) (#141)
by Kijiki on Sat Jan 13, 2001 at 08:26:36 PM EST

Where did you get that 5-6cents/KWH number from? Last month, I paid PG&E 29 cents per KWH, and the month before that, it was 15. In the year I've lived in SF, the lowest price I've paid was 8cents/KWH.

If they're talking about rates 5-10x to match wholesale, , I'm dreading next month's bill.

[ Parent ]
Libertarians? (4.20 / 5) (#78)
by espo812 on Wed Jan 10, 2001 at 09:12:12 PM EST

the libertarians will object to public ownership of power plants
As well as virtually every other part of the plan. Environmental regulations in California don't allow anyone to reasonably produce electricity. Coupled with the fact that the population there is raising at 13% annually, this dosn't work too well does it? Now California has to go begging to other states for power that they didn't want to produce themselvse. Of course these other states don't want to provide the power for less than it costs to produce it, but California is pleeding to the federal government for relief. CA made this bed, now they should lay in it.

It's interesting that in the name of "de-regulation" there are even more regulations. And now the politicians can get away with blaming the market on the problem that they themselves created. Yet another example of how the government is the least capable entity to run a market.

Just my US$0.02 - feel free to ask for change.

espo
--
Censorship is un-American.
Generators are profitable (4.00 / 1) (#108)
by aphrael on Thu Jan 11, 2001 at 04:07:41 PM EST

regulations in California don't allow anyone to reasonably produce electricity

I think that's an overstatement ... the generators are all turning massive profits this year. The problem is that nobody could get new plants *built* until a year or two ago; the other problem is that the retailer is being forced to sell at below wholesale cost, which has nothing to do with environmental regulation per se.

[ Parent ]

Southern California Edison VS LA DWP (3.50 / 6) (#81)
by Educated Escort on Wed Jan 10, 2001 at 10:42:58 PM EST

Unfortunately I live about a half of a block away from the cut off line of being a DWP customer (the publicly owned electric company here in Los Angeles) Instead I am unlucky and am a SCE customer (the privately owned screwed up monopoly)

I saw a great speach the other day given by the head of DWP explaining why they weren't in the mess SCE has gotten themselves into. Pretty interesting.

Gray Davis maintains a residence on the block I live in (saw him voting recently at the polls for the Presidential election) and he sure as hell should take a stand. He is SCE as well and will endure the potential rate hikes (although I suppose he isn't at his place here much these days)

Anne marie

"It has become appallingly clear that our technology has surpassed our humanity"

Albert Einstein


Interesting (4.50 / 2) (#83)
by flieghund on Wed Jan 10, 2001 at 11:10:20 PM EST

I'd be interested if you (or anyone else =) could provide a link to a web version of that speech.

I'm in the opposite situation from you: I live about half a block inside LA DWP territory. When I first moved in, I was bummed because SCE was offering rebates for energy efficient refrigerators and LA DWP wasn't. I'm not complaining now.

I was just at the LA DWP web site and noticed this nice little tidbit at the end of a press release:

While electric rate increases have increased for some utilities in California, Los Angeles city residents continue to enjoy stable rates that have remained unchanged for almost nine years.

Apparently, LA DWP has so much generating power that it has been selling 300-500 MWH to the ISO to help out with the demand!


Using a Macintosh is like picking your nose: everyone likes to do it, but no one will admit to it.
[ Parent ]
Hey! (none / 0) (#123)
by fluffy grue on Thu Jan 11, 2001 at 11:59:37 PM EST

Does that mean that you and Anne Marie are neighbors? :)
--
"Is not a quine" is not a quine.
I have a master's degree in science!

[ Hug Your Trikuare ]
[ Parent ]

Probably not (none / 0) (#126)
by flieghund on Fri Jan 12, 2001 at 10:06:51 AM EST

A very intriguing idea, but I doubt it. I would be shocked if the guvnah kept a residence in this part of town (zip 90034). Brentwood seems a much more likely location than "Westside Village" or whatever the "community" I live in is supposed to be called.


Using a Macintosh is like picking your nose: everyone likes to do it, but no one will admit to it.
[ Parent ]
Was a joke :) (none / 0) (#127)
by fluffy grue on Fri Jan 12, 2001 at 11:58:38 AM EST

Person A is half a block inside some radius. Person B is half a block outside some radius. By stupid-people logic, you're a block apart. :)
--
"Is not a quine" is not a quine.
I have a master's degree in science!

[ Hug Your Trikuare ]
[ Parent ]

Closer than you think........ (2.00 / 2) (#139)
by Educated Escort on Sat Jan 13, 2001 at 07:20:14 AM EST

I'm only one zip code away. I think we are neighbors actually now that I looked the coverage area up on the map.

SCE ends right near where the dividing line of our zip codes are.

Anne Marie


"It has become appallingly clear that our technology has surpassed our humanity"

Albert Einstein


[ Parent ]

Washington (3.28 / 7) (#86)
by /dev/null on Wed Jan 10, 2001 at 11:41:34 PM EST

Here in the state of Washington, the California situation has us all really pissed off. While we once had the cheapest electricity in the nation due to our huge, salmon-slaughtering dams, we now have to endure rate hikes up to 15% to feed the hungry server farms in California. It is so bad that our governor begged us to try to conserve electricity... I just wish there was some sort of giant resistor we could set across the power lines leaving the state =). Utility deregulation has become a complete failure... there are some things that really are better left off to a monopoly.

Why not encourage more micro-generation? (4.40 / 5) (#98)
by raygundan on Thu Jan 11, 2001 at 11:42:14 AM EST

Based on other laws passed in California, it seems like a place where the environmental concern of the populace is higher than average. Just the sort of place that would be willing to adopt independent generation-- rooftop solar panels, single-house fuel cells, windmills, etc...

I know that incentives are already in place to encourage some of these options in CA, but perhaps the government should allow the power company to invest in equipment like that as well-- or even encourage or require it. Instead of building huge new generation plants, power companies could subsidize the cost of installing generation equipment on customer property, and sell the excess power to other customers as part of their total generation. Perhaps the property owner sees a significant discount on their electric bill in exchange for the use of their roof/fuel-cell closet/windmill pole. GE already makes a fuel cell large enough to run a house, and solar panels and windmill generators have been available for years.

The power companies could add generation smoothly, a little bit at a time, and down the road a couple of decades, the system would be greatly resistant to centralized failure (ie hydroelectric can't run due to low rainful, killing a significant fraction of generation). There are some kinks to work out, obviously, but if the phone company can maintain equipment on people's property like this, surely the power company could do it as well!

Microgeneration & Cogeneration (5.00 / 1) (#137)
by mymantra on Fri Jan 12, 2001 at 08:30:12 PM EST

Microgeneration should be part of the solution, as well as co-generation. Co-generation is where a business sets up its own power plant to meet its own power needs (for cost or reliability reasons) and sells excess capacity back out to the public power grid. Decentralization is a good thing in this case. Since part of the problem is that the distribution network has reached capacity, generating power where it's needed obviates that element of the problem. It also means that the consumers are more directly impacted by any economic, environmental or lifestyle issues resulting from generation, providing exactly the feedback loop you should have in place. No more "the problems my using the power creates is someone else's problem back in Podunk UT, so who cares" attitude. Of course you might put a lot of public interest folks (like lawyers and environmentalists) out of business if such a feedback loop existed so even they have a vested interest in not truly fixing such problems - it's job/life-style security.

However, one of the most insane regulations of the (non-)deregulated CA electrical market that helps squelch micro- and co-generation requires that co-gen's only sell power back to the grid in direct proportion to the co-gen's primary power consumption. So if a big company has it's own cogeneration power plant with enough capacity to sell to the grid and reduces its own power consumption (either due to conservation or due to microeconomic downturn), they must sell proportionally less power back to the grid, even though the economics of running a power plant favor selling more power, i.e. all the excess capacity up to the rated capacity of the plant.

In other words available generating capacity already in CA, often close to the points of consumption, is purposely wasted because excess capacity can not be sold precisely when it's most readily available. The only viable solution for such a company if their own demand drops beyond a certain operating cost point is to shutdown the co-gen and tap into the public grid, thereby increasing the public power load even more. If that excess power were sold in the market, basic supply-demand relationships say that the price of power would marginally decrease with the marginal addition of excess co-gen power to the grid. Sounds like a good thing. But no one is allowed to do it because of regulations against it.

The market was never deregulated at all, and the few moves that were taken were largely all the worst possible moves. The fact that prices were fixed along the supply chain cries out to the example of the economic damage of decades of fixed national exchange rates to Latin American economies. This is macroeconomics 101! Not a clue.

Prices should absolutely be allowed to float! For those who can't handle that risk , 3-, 6-, 12- month pricing option contracts should be made available directly to consumers. You will never get the cheapest price if you feel compelled to buy an option (insurance) because you have to be willing to live with both the upside and downside risk but you'll have stability. You can't have your cake and eat it too.

It's hard not to think there was a conspiracy to "slander" deregulation as a strategy. Either that or absolutely everyone involved is dumber than a box of rocks, barely competent to be walking the streets without supervision.

[ Parent ]

Japan's earthquake safety record (1.50 / 2) (#111)
by aphrael on Thu Jan 11, 2001 at 04:24:00 PM EST

is good, yes, but as a citizen of California i'm reluctant to depend on it --- I remember both the smug Japanese reaction to Loma Prieta, when they bragged about how much better their safety systems were and how things like freeways falling down could never happen there *and* the aftermath of Kyoto, where things ended up being far worse than they've ever been here. There's a lot of self-congratulatory rhetoric coming out of Japan on this subject which *appears* to be justified ... but given their track record, i wouldn't cast a ballot to rely on it.

electricity de-regulation in New Zealand (4.33 / 3) (#125)
by Harlequin on Fri Jan 12, 2001 at 05:20:46 AM EST

New Zealand also de-reulated it's electricity, for the same reasons (pressure by business lobby groups, the economic ideology of the time being above question, etc), with some of the same results (eg price hikes, less reliable system). Likewise in all the other sectors I can think of, the usual result is if you're well-off, you'll probably be fine - and might even be better off. If you're Joe Average, the benefits are usually pretty hard to find - even when the de-regulation lobby attempts to point them out.

Presumably the idea is that competition between vendors for buyers results in lower prices. The reality seems to be that buyers are influenced by advertisements. A company which doesn't waste its customer's money on advertising and thus can offer lower prices, simply gets anhilated in the marketplace - what good are unadvertised low prices, next to the power of marketing? (Which inflates the price and adds nothing of value. Yeah that's an "efficient" model). And don't say it's because people are stupid - power plans often operate in complex ways and are made with access to statistics and information that consumers can't get, unless they were to spend hundreds or thousands of dollars worth of their time researching crap - often a false economy for each individual, leaving marketing agencies - the only completely non-productive parties involved - as the big winner. (As usual :)

It's nice in theory, but the model just doesn't work in the real world. Actually, that's not quite true - it works _very_ well for the people who are pushing it.
Hmmm...


I'm confused on two points (4.00 / 1) (#135)
by SlydeRule on Fri Jan 12, 2001 at 04:41:26 PM EST

Perhaps someone can clarify these points for me:

1. How did SDGE manage to pay off its sunk costs, thereby freeing itself of the retail price cap, if its wholesale costs were so high that as soon as the retail cap was removed, SDGE had to triple its retail rates?

2. How is it that with a Federal wholesale price cap in place such that gas-fired electricity became uneconomical, the wholesale prices from providers outside of California climbed to levels that necessitated SDGE's price increase and are driving the other two distributors into bankruptcy? (PG&E claims that they're "paying out 15, 18, 40 cents a kilowatt hour" at wholesale while capped at "about a nickel" for retail.)

If the wholesale price cap had been California-only, I can easily see how this could happen once California's demand exceeded its internal (price-capped) supply. But with a Federal wholesale price cap, it doesn't make sense to me... unless maybe we can blame Canada.

SDGE (none / 0) (#146)
by aphrael on Sun Jan 14, 2001 at 04:38:06 PM EST

paid off its sunk costs *before* the wholesale rates skyrocketed.

[ Parent ]
The Example of Quebec (5.00 / 2) (#144)
by Tester on Sun Jan 14, 2001 at 10:26:19 AM EST

If you take the example of Quebec, you can see how this deregulation idea is just stupid. In Quebec, all power companies where nationalised in 1963 and have since been part of a province-wide electricity monopoly. This has allowed many things to happen. First, we have the cheapest electricity in America. Second, we have been able to build many large dams (gigantic would be more appropriate) that have a very large up-front cost but allow for a much lower per-watt cost.

The way it is now structured is that Hydro-Quebec (that's the electricity monopoly) is a private company but with only one shareholder, the government of Quebec. It is part of the North American market, but it spends most of its time selling because we produce very cheap electricity, so we can make huge profits selling it to NY and the other neighbouring states. Also, since hydro-quebec is government controlled, the price as been frozen for years and as its making a billion dollars in profit, the gov sees no reason to pay the political price of increasing the cost. And anyways, this profits goes into the gov's budget so they can use it instead of raising taxes. Meaning we keep the lowest price in America. We also have many electricity eating plants (like Aluminium plants) here since we sell the electricity so cheap. This also means that Americans who buy our electricity because their private companies are too badly managed can pay our taxes. Those people are really nice...

How not to deregulate | 148 comments (140 topical, 8 editorial, 0 hidden)
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